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Lack of confidence in the UK economy continues to drag on sentiment among investors, who point to pressures on the High Street and Brexit uncertainty as negative factors, according to Hargreaves Lansdown’s Investor Confidence index.

Although confidence in the UK market reached its highest level since January, with the HL Investor Confidence Index rising 16% to 80 this month, the HL UK Economic Confidence Index fell again from 66 to 62.

Investors pointed to concerns around low growth and productivity, debt and political issues for the UK economy while for UK markets, there was optimism for overseas earning companies.

According to the Office for National Statistics, the UK economy grew by just 0.1% in the first quarter of the year, the slowest rate since Q4 2012 and missing analysts’ expectations of 0.3% growth, while Prime Minister Theresa May is yet to formulate an acceptable trade proposal to bring to the European Union regarding the UK’s departure.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the economic picture had also been “muddied” by the ‘Beast from the East’, a period of prolonged bad weather earlier this year, which dented economic growth in Q1.

This, she said, had affected sentiment towards the UK economy, along with “misery” on the High Street and “underwhelming” growth figures.

She added: “By contrast, we have seen confidence in the UK markets driven in part by optimism for firms deriving the bulk of their income from overseas.

“And while the progress of Brexit negotiations, uncertainty and increased volatility remain concerns for investors, it appears they have had their worst fears allayed by a more positive month in the market.”

Some fund managers have said the negative sentiment towards the UK and is a buying opportunity with Old Mutual Global Investors’ Richard Buxton recently urging investors to “fill their boots”, while Brooks MacDonald has reduced its underweight UK position.

Sentiment towards the UK market remained significantly behind enthusiasm for global markets with North America jumping 20% to 95, while the Asia Pacific market scored the highest with 123 versus 120 for global emerging.

European equities were also on the rise, jumping from 92 to 96 while Japanese equities climbed from 103 to 107.

Source: Professional Adviser

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