Europe weighs on global confidence

The State Street Global Investor Confidence Index (ICI) fell to 112.1 for December 2014.

State Street said the 1.6 point drop from November’s revised reading of 113.7 was led by the “largest decline” in European sentiment with the regional ICI falling 10.2 points from 129.7.

“This month’s fall in confidence was led by European investors,” State Street senior vice president and head of global macro strategy Michael Metcalfe said.

“With no additional monetary stimulus from the [European Central Bank] in December, hopes have been transferred to the upcoming January meeting.”

“However, with Eurozone deflation soon becoming a reality and [Greece’s] default risk rising once more, Eurozone confidence appears vulnerable to any disappointment,” he said.

Alongside the decline in European investor sentiment, North America also fell but only by 1.5 to 102.6 while the Asian ICI rose by 1.7 points to reach 100.

State Street Associates director Kenneth Froot pointed out long-term investors had been seeking exposure to risky assets for much of 2014 although that showed signs of slowing down.

“This appetite has shown signs of diminishing in December as our Global ICI slipped to its lowest level of the year,” Mr Froot said.

“While the collapse in oil prices should provide a substantial boost to real incomes in 2015, presently it has added to fears about the global growth outlook, prompting a modest pause in investors’ risk-seeking run,” he said.