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Investor optimism plunges to record low due to war fears, according to UBS Index

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Optimism amongst individual investors across Europe fell to a new low in February as the prospect of war against Iraq dominated all other political and economic issues, according to the Index of Investor Optimism® - EU 5, a joint effort of UBS and the Gallup Organization.

The overall Index of Investor Optimism - EU 5 decreased by 10 points to a level of -47 in February, down from -37 in January, reaching the lowest measure since the Index - EU 5 baseline survey was conducted in October 2001 (Table 1). Investors' growing concerns about the financial markets outlook and the ability to achieve their investment targets over the next 12 months are primarily responsible for the decline in the Index (Table 2). This month, 61 percent of investors report they are pessimistic about the performance of the stock markets over the coming year, compared with 52 percent in January. Indeed, 63 percent of those surveyed say now is not a good time to invest, the highest level measured since the survey began.

Among EU 5 investors, a potential war in Iraq is viewed as the most important threat to global stock markets, with 60 percent of those polled sharing this view (Table 3). This is followed by the possibility of major terrorist attacks, (16 percent); a prolonged economic downturn, (13 percent); a potential conflict with North Korea, (5 percent); and a significant depreciation of the US dollar, (4 percent).

Importantly, 28 percent of investors believe a war with Iraq will have an extremely negative impact on global stock markets, and an additional 43 percent foresee a somewhat negative effect. In contrast, 16 percent of those polled anticipate a war with Iraq will have a positive impact on the markets, and 10 percent expect no significant impact. (Table 4).

London, February 24, 2003