State Street Global Markets, the investment research and trading arm of State Street Corporation, said that global investor confidence fell 11.2 points in May to 88.2 from April's revised reading of 99.4.

Declines in sentiment in North America were a key contributor, with institutional investor confidence falling 5.0 points from 103.3 to 98.3. Among European investors, too, confidence was lower, falling 3.5 points from 95.7 to 92.2. In Asia, by contrast, confidence was robust, rising 6.8 points to reach 101.0.

Developed through State Street Global Markets' research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Paul O'Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors.

The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher is risk appetite or confidence It is based on actual trades rather than survey data, and as a result it captures the sentiment of institutional investors with unique precision.

"This month we saw institutional investors continue on the course they set last month, leading to substantial cuts in risk allocations," commented Froot. "As was true at the onset of the sub-prime credit crisis in 2007, institutions were prescient with the cutback in risk that they instituted in March, even as markets continued to rise. The continued de-leveraging that we see this month signals that there is considerable uncertainty around euro-region deficit levels, and their knock-on implications globally."

"Looking at the underlying data in more depth, it is fair to say that uncertainty around the outcome of the British elections played a role early in this month's declines, as did the market volatility exhibited by US exchanges on May sixth," added O'Connell. "The only optimistic note was struck by Asian institutional investors, though here too, investors were selective, favoring commodity-producing countries, but shying away from Europe and the US."