Global investor confidence fell in December, led by European investors, as the crash in oil prices and the sharp gains in the dollar fueled fears that some companies will be unable to pay off large debts accumulated over recent years of low dollar and high oil dynamics.
The State Street Global Investor Confidence Index declined to 112.1 points, down 1.6 points from a revised reading of 113.7 in November. The European index dropped 10.2 points to 119.5 as the State Street regional index for North America fell 1.5 points to 102.6. The Asia index, however, rose 1.7 points to precisely 100.0.
Global investor confidence has fallen every month since September, when it reached 123.9 points on optimism over the outlook for equities, particularly in Europe. The European index in September reached its all-time high of 140 points and has declined steadily since.
‘Long-term investors have been seeking exposure to risky assets for much of 2014, but this appetite has shown signs of diminishing in December as our Global ICI slipped to its lowest level of the year,’ Kenneth Froot, who helped design the index, says in a press release. ‘While the collapse in oil prices should provide a substantial boost to real incomes in 2015, presently it has added to fears about the global growth outlook, prompting a modest pause in investors’ risk-seeking run.’
A reading of 100 in the indexes, which measure the actual buying and selling patterns of investors, is neutral. Higher readings indicate investors are increasing their long-term exposure to riskier assets while lower readings indicate their risk appetite is decreasing.
Michael Metcalfe, senior vice president and head of global macro strategy at State Street Global Markets, says in the press release that European investor confidence is particularly fragile at the moment and prone to drops.
‘With no additional monetary stimulus from the ECB in December, hopes have been transferred to the upcoming January meeting,’ he says. ‘However, with Eurozone deflation soon becoming a reality and Greek’s default risk rising once more, Eurozone confidence appears vulnerable to any disappointment.’
