The State Street Investor Confidence Index (ICI) fell to 105.1 in August, down 2.6 points from July’s revised reading of 107.7, with European confidence dropping by 8.2 points to 97.1 and Asian confidence falling 7.6 points to 93.0.

“The pressure exerted on the currencies of large current account deficit countries, notably Brazil and India, has certainly put a dent in confidence,” State Street Associates’ Paul O’Connell said.

“We do note, however, that while investors have been quick to sell emerging markets bonds, there is no evidence yet that their appetite for emerging markets equities is waning, and indeed a portion of the cash released by fixed income sales has been recycled into equities.

“We also note that flows to countries less exposed on the current account deficit side, such as China and South Korea, have been relatively strong.”

North American investor confidence also declined slightly, reaching 112.0 from a July reading of 114.0.

State Street said the conservatism in the North American market is a result of concerns that the United States will stop stimulating the economy.

“The consensus is certainly that monetary authorities in the US will shortly begin to cut back on the monetary stimulus that has been in place for some time now, but there is recognition that this will only occur in response to improved US fundamentals,” index co-developer and Harvard University professor Kenneth Froot said.

“Certainly, the recently-announced policy that short-term interest rates will be tied to the rate of unemployment lends support to this view.”

However, Mr Froot added that, broadly, risk tolerance has remained steady.

“Notwithstanding the turbulence in markets witnessed this month, especially in some emerging markets, institutional investors have broadly maintained their stance on risk, with only a modest pull-back seen in the global index,” he said.