State Street’s global Investor Confidence Index (ICI) fell to 95.7 in October, down 5.6 points from September’s revised reading of 101.3.

The decline was driven by sentiment in North America, which fell substantially by 17.8 points, pushing the North American ICI well into pessimistic territory at 86.5.

By contrast, confidence improved substantially among European institutional investors, reflected in a 10.2 point increase in the European ICI to 111.9. Asian investors stayed their course, and as a result the Asian ICI saw only a modest change, rising 0.9 points to finish at 96.2.

The Investor Confidence Index was developed by State Street Associates, State Street Global Exchange’s research and advisory services business, and Harvard University professor Kenneth Froot. It measures investor confidence or risk appetite quantitatively by analyzing the actual 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 risk appetite or confidence. A reading of 100 is neutral; it is 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.

Paul O’Connell, State Street Global Exchange, said: "The fiscal showdown in the US clearly took the wind from the sails of institutional investors, pushing the Global ICI into negative territory for the first time since May of this year. Notwithstanding the 11th hour resolution of the immediate crisis, investors are aware that the long-term fiscal policy of the US remains to be negotiated, and that the impact of such negotiations on growth and confidence is yet to be seen."

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Michael Metcalfe, head of cross strategy research at State Street Global Markets, said: "The fact that the North American ICI posted a record fall in the same month that the European ICI posted its largest gain in almost three years tells you all you need to know about how policy perceptions are changing between the two areas. With European confidence at its highest level since July 2007, investors hope that the worst of the Eurozone crisis is past. The US crisis of confidence, in contrast, may just be the beginning, unless policy uncertainty is reduced."