Lloyds PB has released its latest investor sentiment index which shows divides in the UK surrounding Eurozone and UK equities.

Investors' attitudes towards financial markets tends to still follow whether they want to leave the European Union or not, acording to the latest investor sentiment index from Lloyds Private Bank. 

As the anniversary of the UK government’s decision to trigger Article 50 is on the horizon, the survey reveals notable differences in sentiment across the UK during March 2018.

London, which had the highest remain vote (62 per cent) during the referendum, has the most positive net sentiment on eurozone equities (15 per cent, based on subtracting negative from positive views about this asset class) in the UK.

The North, which includes Yorkshire and the Humber, and had the third highest leave vote in the UK, has the highest positive net sentiment towards UK equities (15.9 per cent). The North also has the second most negative net sentiment towards eurozone shares (-9.5 per cent).

The East, which also voted leave, (56.5 per cent) reflects this trend with a positive net sentiment score of 7.4 per cent for UK shares but -4.7 per cent for eurozone stocks.

Scotland, although scoring both asset classes negatively, favoured eurozone (-3.6 per cent) over UK stocks (-5.7 per cent), in line with the remain vote (62 per cent) cast during the referendum.  

Northern Ireland, where there is uncertainty about its border following Brexit, is the only region to show opposing sentiment to its referendum vote, as the region with the strongest negative net sentiment towards eurozone shares (-27.9 per cent).

Ups and downs
Sentiment has fallen for the first time in six months to 9.6 per cent (down 1.2 per cent). 

The fall in sentiment follows increased market volatility in recent weeks, but investor confidence remains higher than any score achieved throughout 2017 and is up 3.7 per cent compared to this time last year.

Equities
Sentiment fell across all equity indices during the month, with US (-9.3 per cent) and UK (-9.2 per cent) equities experiencing the largest drop in investor confidence out of all eleven asset classes surveyed. 

At the opposite end of the risk spectrum, sentiment improved for gold (up 2.6 per cent), while cash climbed 7.5 per cent, improving from February’s reading of-22.5 per cent to -14.9 per cent.

However sentiment across all equity markets is significantly higher relative to last year, with the exception of UK shares (-17.7 per cent).

Regional asset performance
Following a 4.7 per cent fall during February, emerging market shares were the top performing region with a return of 27.6 per cent.

Both the US and Japan have produced positive returns for March at 14.8 per cent and 13.6 per cent, respectively.  

The UK continued to disappoint relative to other regions, with UK shares up 0.7 per cent over 12 months and UK government Bonds down 1.2 per cent, over the same time period.

“As we approach the anniversary of the government triggering Article 50, it’s interesting to see investor sentiment broadly mirroring the referendum results,” said Markus Stadlmann, chief investment officer at Lloyds Bank Private Banking. “It could reflect political leanings but it’s more likely that investors are simply keeping a close eye on how the negotiations unfold and what impact these will have regionally.”

Stadlmann added: “The recent market correction was sparked by US wage growth being higher than expected, which will put further pressure on US policymakers to more aggressively increase interest rates. This news has particularly taken its toll on global equities and fixed income assets, with cautious investors viewing the safety appeal of gold and cash more favourably. Increasing political instability in Europe, and the impact of Trump’s US trade war have further added to investor nervousness this month, impacting both performance and investor confidence across nearly all asset classes.”