Confidence among European institutional investors fell by nearly 10 points this month as geopolitical events and stock market volatility hit, but remains positive, according to State Street Global Exchange.
The recent failure of Italy to form a government, as well as continuing trade war fears between the US and China, led the firm's investor confidence index for Europe to fall from 111 points to 101.5 points over the month.
Meanwhile the global index fell from 115.3 to 103.5, and the figures for North America and Asia settled on 104.3 and 103.2, down from 113.5 and 112.7 respectively.
The index aims to be a quantitative measurement of investor confidence or risk appetite based on the actual buying and selling patterns of institutional investors. For example, greater allocation to equities represents greater risk appetite or confidence, and a 100 score is ‘neutral' where investors are neither increasing nor decreasing their long-term allocations to risky assets.
State Street Associates founding partner Kenneth Froot said the longer term consequences of recent geopolitical events will need to be watched.
"Now, well into 2018, institutional investors face a challenging environment with a pick-up in stock market volatility and elevated stock valuations despite strong earnings," he said. "The success of Eurosceptics in Italy has shaken investor appetite, while rising trade tensions between China, the EU and the US have escalated global concerns and uncertainty. It will be interesting to see how confidence plays out in the face of those risks."
Head of investor behaviour research Rajeev Bhargava added the index showed investors had a "subdued willingness" to increase exposure to risky assets.
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