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Investor confidence surges, still below neutral: State Street
North American and European institutions drove a seven point increase in State Street's June Investor Confidence Index (ICI) and produced the highest ICI in 2012, but it remained below neutral at 93.5.
Although Asian investors appeared cautious, gaining one point to reach 90.4, North American institutional investors rose 5.7 points to 93.5, while European investors' risk appetite gained 4.5 points to reach 102.5.
According to State Street Associates director Paul O'Connell, Europe's above neutral ICI revealed Europe's appetite for equities was highest among global investors.
"We see this also in the sectoral decomposition of flows, which shows some rotation out of safe havens and into more risk-sensitive sectors," he said, although he added it also reflects sentiment about the Eurocurrency and not high expected returns.
Harvard University professor Kenneth Froot said institutions had started buying equities across all sectors mid-June, at the fastest pace in two years.
"The buying was relatively broad-based and diversified across all sectors. At 93.5 … it cannot be said that investors have become bullish. However, it is fair to say that they have tempered their bearishness a little," he said.
He said the slow pace of decision-making and reform in Europe would be the deciding factor on whether positive investor sentiment would remain.
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