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Investor confidence falling across the globe

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The Global Investor Confidence Index, published today by State Street Global Exchange, indicates that investor confidence fell in every region of the world during January this year.

The Global ICI fell by 5.5 points to 106.7; the European ICI fell 5.7 points to 113.9 (the largest decline in sentiment); the North American and Asian ICIs both fell by 1.1 points, to 101.8 and 99.6 respectively.

The Index measures investor confidence and risk appetite quantitatively, by analysing the buying and selling patterns of institutional investors.

The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher investor confidence. A reading of 100 is neutral; the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures, in that it is based on the actual trades, as opposed to opinions, of institutional investors.

“Global deflationary fears, geopolitical risk and European political volatility led to declines in sentiment in January,” Kenneth Froot, who designed the index, said. “Given soft inflation and retail sales in the U.S., all eyes will be focused on the Federal Reserve on Wednesday to see if the FOMC stays on track to raise rates in Q2.”

“The decline in sentiment was again driven by European investors,” Jessica Donohue, executive vice president at State Street Global Exchange, said. “It will be interesting to see whether recent sovereign quantitative easing by the ECB will offset rising political uncertainty in the Eurozone and lead to a stabilisation in sentiment.”

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