Debt worries rattle investor confidence

Ongoing concerns about government debt in the United States and Europe has led to a slight drop in institutional investor confidence during April.

The State Street Investor Confidence Index dropped from 97.3 to 97.0 due to the falling confidence of North American investors, who posted a decline of 3.9 points down to 98.4.

Other regions were more upbeat, with Europe posting an increased confidence rating of 73.2, up from 66.9 from March.

Harvard University professor Kenneth Froot, who helped design the index, said it showed that institutional investors have shifted into a neutral risk gear.

“Recent signals suggesting that US growth expectations for the first quarter may be trimmed, coupled with ongoing concerns about the resolution of fiscal deficits in both the US and Europe, have dampened enthusiasm for further equity risk allocations,” Froot said.

Meanwhile, he said inflows into emerging markets have tapered off to a degree from the robust levels seen over recent months.

“Though flows into emerging markets, particularly emerging Asia, remain positive, they are no longer sufficient to outweigh the modest but persistent selling of developed markets equities that we have observed,” he said.