Nouvelles UBS

European Investor Optimism Recovers Slightly on the Heels of an Improving Outlook for Financial Markets, According to UBS Index

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Optimism among individual investors across Europe improved slightly in November, according to the Index of Investor Optimism® - EU 5, a joint effort of UBS and the Gallup Organization. While the outlook for global financial markets brightened somewhat, investors expressed increased pessimism about the European economy.

The overall Index of Investor Optimism - EU 5 increased by 5 points to a level of -28 points in November, up from -33 in October (Table 1). Investors report increased optimism for both the short-term and long-term outlook of the financial markets (Table 2). The share of investors who are very or somewhat optimistic about the prospects for the stock market over the next twelve months increased from 22 percent in October to 27 percent this month, compared with 51 percent who expressed pessimism in November, down from 59 percent last month. Moreover, those surveyed expect an average rate of return of 7.5 percent on their portfolio over the next twelve months, up from 6.3 percent in October.

Investors continue to view a potential war with Iraq as the most serious threat to the global financial markets, although the percentage of investors who share this opinion declined to 37 percent from 47 percent in October (Table 3). This is compared with 27 percent who view a major terrorist attack as the biggest threat (up from 19 percent) and 20 percent who cite a prolonged economic downturn as the largest potential problem (up from 18 percent).

In contrast to the improved financial market assessment, investors report they are increasingly worried about the prospects for economic growth and unemployment in Europe. The share of investors who are pessimistic about the outlook for unemployment rose from 54 percent in October to 59 percent this month, while those who expressed optimism declined from 24 percent to 20 percent. Importantly, fewer investors (61 percent compared with 68 percent last month) believe that a recovery of the European economy is the most likely scenario, while 32 percent believe that continued economic weakness is most likely, up from 25 percent in October. (Table 4).

London, November 25, 2002