The Standard & Poor's 500 Index, the UK's FTSE 100 Index, Japan's Nikkei 225 Stock Average, Spain's IBEX 35 Index, the Swiss Market Index, France's CAC 40 Index, Italy's S&P/MIB Index and Germany's DAX Index will decline, according to the Bloomberg Professional Global Confidence Survey of 4,232 users taken July 7 to 11.
In Brazil, the only market where investors predict gains, optimism dropped to a five-month low, the survey showed. The MSCI World Index retreated 17 per cent this year, the most since 1970, and entered a bear market last week as oil rose to a record, losses and writedowns at banks exceeded $416 billion and mortgage delinquencies prompted the US Treasury to shore up Fannie Mae and Freddie Mac.
If history is a guide, the benchmark index may fall another 12 per cent, based on the average decline of seven bear markets since 1969, according to data compiled by Birinyi Associates & Bloomberg.
"What we get on an almost daily basis is a reminder that the credit-market crisis is far from over, and if anything it's taking on new casualties,'' said Luis Benguerel, a Barcelona-based trader. "It's hard to see a rebound in equities until the extent of this crisis is clear.''
Financials slump
Confidence fell in all nine countries for a second month, the survey showed. Users in the UK and Spain were the most pessimistic after the housing slumps worsened and consumer prices rose at the fastest pace in at least a decade. Investors in Mexico forecast losses for the Bolsa index.
Bank and brokerage shares fell as losses from the collapse of the subprime-mortgage market rose. The MSCI World Financials Index dropped 40 per cent since October, the biggest decline among 10 industries in the index, a gauge of 1,742 companies in 23 developed markets.
The MSCI World rose 1 per cent to 1,337.53 as of 4:38 pm in New York, breaking a five-day losing streak.
Fannie Mae and Freddie Mac, which own or guarantee about half of the $12 trillion of US home loans, tumbled more than 82 per cent in New York trading this year as mortgage losses increased. Treasury Secretary Henry Paulson is seeking authority from Congress to increase credit to the lenders and buy their stock, raising investor concern that common shareholders will be wiped out.
Oil's rise
The 85 per cent rise in oil prices in the past year is fueling declines in stocks and investor confidence, according to Barton Biggs, a managing partner at New York-based hedge fund Traxis Partners LLC. Crude climbed to a record $147.27 a barrel in New York last week.
"The price of oil is sapping consumer confidence and consumer incomes and is driving down stock prices,'' Biggs, the 75-year-old former Morgan Stanley strategist, said in a Bloomberg Television interview.
Companies in the MSCI World that depend on discretionary consumer spending tumbled 30 per cent since the index rose to a record in October. General Motors, the biggest US automaker, helped lead the retreat as $4-a-gallon gasoline cut sales. Shares of the Detroit-based company plunged 75 per cent since October.
The Bloomberg stock confidence index in the US dropped to 28.39 from 35.36 in June, while the UK index declined to 18.26 from 25.87. A reading below 50 indicates investors expect stocks to retreat while a reading above 50 signifies a potential rally.
Brazil optimism fades
Brazil's reading fell to 54.29 from 70.86. Brazil was the only one of 10 markets surveyed with a reading above 50, and is the only one that averted a bear market, signified by a 20 per cent decline from a recent high.
The loss of investor confidence may signal stocks are poised to rebound because money managers probably already sold shares, said Alberto Espelosin, who helps oversee about $12 billion as a strategist at Zaragoza, Spain-based Ibercaja Gestion and took part in the survey.
"The bad news is simply everywhere you look,'' he said in an interview. "Whenever we reach these levels of pessimism, stocks may be near a rebound or a recovery.''
Merrill Lynch survey
Fund managers who together oversee $610 billion are hoarding a record level of cash after reducing their holdings of UK and European equities and cutting investments in emerging markets to the lowest since 2006, according to a Merrill Lynch survey released on Thursday.
Any rally in equities may be short-lived because economic growth is slowing around the world, said Masaru Hamasaki, a senior strategist who helps manage the equivalent of $3.3 billion at Toyota Asset Management in Tokyo. Economists expect growth to weaken next year in seven of 10 countries in the Bloomberg confidence poll, according to forecasts compiled by Bloomberg.
"With so much anxiety about the state of the global economy, the market won't likely find its bottom until later this year,'' Hamasaki said. Money managers "are looking to take risk off the table in this kind of environment,'' he said.
