The latest State Street Investor Confidence Index shows that global investor confidence rose from 91.2 to 96 points in the month of June, with the biggest jump in North America but the highest overall levels in the Asia Pacific.
Confidence in North America increased by 5.4 points to 99.9, in Europe by 2.4 points to 100 while Asia was up 2.1 points to 104.5.
The index analyses the buying and selling patterns of institutional investors and assigns a meaning to changes in risk appetite, with a greater allocation to equities signalling higher confidence. The index is purely quantitative rather than factoring in opinions.
“This month saw concerns about the sovereign debt situation in Europe providing a catalyst for confidence,” said index developer and Harvard University professor Ken Froot.
“The sequence of relatively disappointing macroeconomic data emerging from the US over the month led to a decline in global equity prices, but institutions have responded by seeking to capitalise on these lower valuations.”
Fellow developer Paul O’Connell from State Street Associates said confidence rose across all three regions following relatively strong earnings announcements from the US corporate sector and improved macroeconomic readings from Europe.
This means investor confidence is markedly more positive than consumer confidence, which fell in June, and the last time such a divergence occurred in February 2009 equity markets went on to rally, O’Connell said.
“It remains to be seen whether slower US growth in the coming quarters and ongoing government and consumer de-leveraging will present an obstacle to such a rally this time round,” he said.
