Investor confidence boosted by European sentiment

The State Street Global Investor Confidence Index has increased by 5.1 points in August to 107.3, up from 102.2 in the previous month.

This was led by a 20-point jump in Europe and a smaller 2.1-point jump in North America. The Asian index fell by 0.9 points.

Rajeev Bhargava, head of investor behaviour research at State Street, said: “Despite the many potential headwinds, including rising inflation concerns and energy security facing the European economy, interestingly, European investors have moved from a risk averse posture to a more neutral posture over the past month as markets rallied through much of August.

“Even after the selloff over the past week, net flows by European investors have been from developed to emerging market stocks, which has driven up the confidence score. However, it is going to be important to monitor whether the enthusiasm persists given recent heightened volatility in equity markets on the back of increasingly hawkish Fed speak.”

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The Investor Confidence Index was developed at State Street Associates, State Street Global Markets’ research and advisory services business, in partnership with FDO Partners.

It measured investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.

A reading of 100 would be neutral; it would be the level at which investors were neither increasing nor decreasing their long-term allocations to risky assets.