Europeans reallocate to UK

European investors are reallocating towards the UK as professional managers believe the FTSE is a temporary buying opportunity, according to State Street.

 State Street’s Global Investor Confidence Index increased to 80.1, up 3.3 points from August’s reading of 76.8, driven by an 18.5 point rise in European sentiment to 107.6.

North American investor confidence declined further in September from 73.5 to 71.8, and Asian investor confidence also dropped from 89.3 to 87.4.

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Co-creator of the index, Kenneth Froot, said the European uptick was driven by reallocations towards the UK as the FTSE had risen back to pre-Brexit-vote levels in 2015, after falling 10% since July.

“As of this reading, the strong September buying we saw earlier in the month has diminished as equity prices have risen. These flows and price fluctuations are understandably volatile given the ongoing updates on the probability of an ill-prepared no-deal Brexit,” Froot said.

State Street Global Markets senior managing director and head of global macro strategy Michelle Metcalfe said the overall global confidence rebound was because central banks globally had stepped up their efforts to provide accommodations as a possible trade truce rose again.

“This is nothing to get too excited about just yet, though. The index is still only marginally above where it began 2019 and remains significantly below the all-important 100 level, which would be consistent with investors adding to their risky asset holdings,” Metcalfe said.

“Just like purchasing managers in manufacturing, investors remain cautious, but marginally less so this month.”

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