Institutional investors turn cautious

European and North American institutional investors have demonstrated increased caution in August, according to the latest State Street Investor Confidence Index (ICI).

The data, released this week, revealed the index decreased by 2.1 points to 106.8 with the decline in sentiment driven by a 4.9 point drop in the European index to 89.3, along with the 0.3 point decrease in the North American index to 111.8.

It said that, by contrast, the Asian index rose by 3.3 points to 99.3. 

Commenting on the result State Street Associates executive and index founder, Kenneth Froot said that after a boost in risk appetite in July, global investors appeared to be 'on hold' in August.

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“With that said, the cut off to this month’s ICI calculation (August 23rd) results in a reading that does not capture investors’ reaction to the Jackson Hole retreat, something that is clearly at the forefront of investors' minds,” Froot said.

State Street Global Markets senior managing director and head of global macro strategy, Michael Metcalfe said growth and earnings had beaten expectations and political risk had not being realised.

However, he said the more cautious approach of European investors showed that the potential headwinds of a stronger Euro and eventual tapering of central bank asset purchases could no longer be ignored.