Italy and Spain are back in focus as bond yields and spreads start rising again.
The latest Sentix euro zone investor sentiment index also seemed to confirm the feeling that crisis worries are back falling to -14.7 in April.
U.S. small business confidence dropped in March for the first time in six months:
Is China heading for a hard or soft landing? One chart to keep an eye on is the relative performance of materials equities, the long run of outperformance since 2000 looks like it might be rolling over.
Germany’s Ifo business sentiment index rose unexpectedly in March, moving in the opposite direction to the the PMI released last week:
Italian consumer morale also rose to 96.8, economists were expecting a slight decline to 93.7.
There is no question that the losses on stock markets at the moment are primarily the result of the Greek crisis. A downgrade of a euro zone country’s sovereign debt to junk is enough to make all but insane mainstream investors take a large step away from risk.
But could it also be that the Greek crisis has come at a time when big investors were looking for an excuse to cool down the equity rally? MSCI’s all-country world stock index hit a peak on April 15 that was not only higher than anything seen this year, but also last year as well. Up about 85 percent from its March 2009 lows, in fact.
Partly as a result, there were some signs emerging that suggested a correction would soon be in the works.
The latest State Street investor confidence index bears some scrutiny. The overall index dropped in February which would seem to be in line with other sentiment indicators such as The Conference Board’s consumer confidence index and the German Ifo on business thinking.
But the State Street fall was entirely due to bearish Asian sentiment. There were gains in the North American and European regional calculations. Also the overall, North American and European indices all came in above 100 — which means that sentiment remains on the bullish side.
It begs the question of whether Asia is a) lagging b) leading or c) just out there on its own.
Good news and bad in the latest investor confidence sounding from State Street. The overall index took a dive again — third month in a row — and is now barely above neutral. That’s the bad news if you are keen to see risk assets do well.
The good news is that despite three months of falling the index is still above 100, showing that risk appetite remains present among the U.S. financial services firm’s institutional investor cllients, albeit only just.
But add to that State Street’s findings that the fall in its global index was almost entirely due to Asian investors. The regional indices for North America and Europe both rose.
Interesting change by State Street in its monthly sounding of its institutional investor clients. The firm has gone back over all its data and rebased it in order to get an indicator that not only marks up and down changes in investor confidence but also suggests what regime investors are in. Ken Froot, the Harvard professor who co-developed the index, describes the move thus:
“We have revised the Investor Confidence Index to provide a better guide as to the level of risk tolerance. Specifically, we have rebased the index so that a level of 100 is ‘neutral’: readings above this level tell us that institutional investors are increasing their allocations to risky assets, while readings below 100 indicate that institutional investors are reducing such allocations.”
So what does this month tell us? The global index is now at a 10-month high, having risen every month since December. But according to the new rebased reading, it has only been in territory that indicates the buying of risky assets for the past two months.
