Asia was the only bright spot for investor sentiment across the globe in January, which could change sharply next month. State Street pointed out that results for January were mostly drawn before fast-moving developments in the coronavirus spread rattled markets and caused major travel lock downs.

For January 2020, the Investor Confidence Index (ICI) fell by 3.2 points to 76.5 from December’s revised reading of 79.7. The North American ICI fell by 3.4 points to 68.2 and the European ICI dropped from 109.4 to 105.5, a 3.9-point decline. In Asia, the ICI rose by 4.8 points to 93.9, shown in the latest data from State Street Global Markets.

The Index measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. It assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

“It is telling that the confidence of European investors has continued to fall. This is similar to the first round of asset purchases from the European Central Bank (ECB) that the promise of buying has as big – if not bigger – signalling effect for investors than the action of buying itself,” Michael Metcalfe, head of global macro strategy at State Street Global Markets said.

“Meanwhile, the cut-off date for this reading (22/1/2020) means that the potential impact of the escalated contagion from the novel coronavirus on sentiment will not be captured this month.”

The data has been gathered before the Chinese virus outbreak burst into the news, causing disruption to travel and supply chains. Wealth management firms had been broadly optimistic - with an air of caution - about global economic prospects this year.