Greek issues confound sentiment

Institutional investors, even those in Europe, were reasonably sanguine about the investment outlook before yesterday's debt default by the Greek Government, according to the latest State Street Investor Confidence Index for June.

The index results, compiled ahead of news of the Greek default, showed that investor sentiment had actually improved during June, with global confidence up 5.6 points to 127, largely driven by strong sentiment among North American investors where sentiment was up 11.7 points to 142.9.

However, Asian institutional investors were clearly more cautious, with the Asian index falling by 10.3 points to 87.6, while the European index fell by 1.2 points to 102.5

Commenting on the index results, one of its originators State Street Associates' Kenneth Foot said "The lack of hawkish sentiment from the Federal Reserve and a reduction in guidance for rates at year-end 2016 and 2017 resulted in a boost to North America sentiment," Froot said.

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However looking to Europe, he said that until 24 June there had been little sign of the uncertainty surrounding Greece impacting investor confidence.

His colleague, State Street Global Macro head, Michael Metcalf, noted that although the confidence of investors based in Europe did drop, it had done so marginally and not enough to offset a rise in confidence in the US.
"We will need to wait to see next month's reading to see if this was based on misplaced confidence in a resolution to the Greek saga or whether the contagion effects from Greece are indeed less than first feared," he said.