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European Investors Looking to U.S.

by Dennis Jacobe

New Gallup/UBS "Index of Investor Optimism -- EU5" data show that investor optimism in Europe increased in March 2002, just as it did in the United States (see U.S. Investor Optimism Surges Again, But…). In addition, the new data show that there is a wide range of optimism levels among investors in different European nations. U.S. investors are much more optimistic than any of their European counterparts, but even within Europe investors in some countries are a lot more optimistic than those in others.

The most interesting finding in the new EU5 data is that European investors are generally more optimistic about the U.S. economy over the next 12 months than they are about the European economy. Of course, this European optimism about the U.S. economy is consistent with the widely held view that economic recovery in Europe will trail behind that in the United States.

In this regard, it is particularly noteworthy that EU5 investors -- like their American counterparts -- are concerned about the accounting industry problems brought to light by the Enron scandal. More than two out of three European investors (68%) say that the issue of questionable accounting practices is hurting the investment climate in Europe. Importantly, while 44% of EU5 investors say this is primarily a U.S. problem, 35% say it is an even bigger problem in Europe. Clearly, accounting concerns sound a note of caution to those hoping that improving investor optimism in the United States and Europe will drive overall improvement in the world economy in the second quarter of 2002.

Investor Optimism Surges in Europe Again

In October 2001, the baseline figure for the "Index of Investor Optimism -- EU5" (measured in five European countries: France, Germany, Great Britain, Italy and Spain) was established at 4. In January 2002, the EU5 Index increased 36 points from its October 2001 level, reaching 40. In February, the EU5 Index declined to 20 before increasing to 30 in March. Consequently, the EU5 Index is now far above its low point of October 2001, but somewhat below its January 2002 high.

Investor Optimism Varies Significantly Across Europe

Over the first quarter of 2002, investors in Great Britain and Italy were much more optimistic than their counterparts in Spain, Germany and France. Great Britain's Index was at 54 while Italy's was at 49 over the first three months of 2002. In sharp contrast, the Index for Spain was at 16, Germany at 12, and France at 9.

Interestingly, investors in each of these five nations give similar ratings for the personal dimension of the Index. In fact, German investors rate the personal dimension at 45, second only to Great Britain, where the level is 52. Even investors in France put the personal dimension at a relatively high 25. In sharp contrast, while the net rating among investors in Italy for the economic dimension is an optimistic 11, and those in Great Britain rate it a positive 2, those in Germany assign a net pessimistic rating of -33 to this dimension, those in Spain a net pessimistic -18, and those in France a net pessimistic -16. Obviously, the differences in optimism across Europe are largely based on differences in investor perceptions of the future of the European economy.

European Investors Optimistic About U.S. Economy

As part of the EU5 Index survey, European investors were asked which of four financial markets (United States, Europe, Japan or emerging markets) they feel most optimistic about with regard to the next 12 months. Overall, 39% of EU5 investors said they were most optimistic about the U.S. financial markets -- more than the 35% who chose the financial markets of Europe, and 16% who chose the financial markets of Japan. In Great Britain and Italy, more investors said they were most optimistic about Europe as opposed to the United States (37% versus 32% in Great Britain, and 40% versus 35% in Italy). In Germany, France, and Spain, however, the majority of investors said they were most optimistic about the U.S. financial markets.

 

In the United States

In Europe

 

In Japan

In countries often referred to as the emerging markets

Don't know/Refused

%

%

%

%

%

Total

39

35

16

5

5

UK

32

37

18

6

7

Germany

43

31

19

2

5

Italy

35

40

14

8

3

France

43

39

11

6

1

Spain

46

31

14

2

7

When these same European investors were asked about which of four currencies (U.S. dollar, euro, Japanese yen or British pound) they found most attractive, most favored the U.S. dollar. Overall, half of European investors (49%) said they found the U.S. dollar most attractive, compared to 25% who said they found the euro most attractive, and 18% who found the British pound most attractive. Only investors in Great Britain favored another currency over the U.S. dollar, with 35% favoring the pound, 29% favoring the dollar and 24% favoring the euro.

 

The U.S. dollar

The euro

The Japanese yen

The British pound

Don't know/Refused

%

%

%

%

%

Total

49

25

6

18

2

UK

29

24

9

35

3

Germany

65

19

4

10

2

Italy

40

29

10

20

1

France

58

34

4

3

1

Spain

57

26

3

12

2

* Results are based on interviews with approximately 200 investors each in France, Germany, Great Britain, Italy, and Spain conducted March 1-15, 2002, and more than 3,000 interviews completed in these same countries -- approximately 600 per country -- during January, February and March 2002. For results based on a total sample of approximately 1,000 investors, one can say with 95% confidence that the margin of sampling error is ±3%. The margin of error for each of the countries, with a sample size of at least 600 investors, is ±4%.


Gallup https://news.gallup.com/poll/5548/European-Investors-Looking-US.aspx
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