Sentiment towards Eurozone shares has plummeted in the last month, with the biggest annual decline on record reported.

Net investor sentiment for the asset class declined 19 percentage points from last month, according to the Lloyds Bank Private Banking Investor Sentiment Index.

It fell 30 percentage points from this time last year to -48%.

UK shares showed the second biggest decline in sentiment to 26%, reversing the 14pp increase seen last month for the asset class, bringing it back to pre-election levels in May.

Experts said the “bleed-across” from Eurozone shares could also explain the fall in UK shares asset class this month. Emerging market shares saw the third largest decrease (-10pp), to 10%.

Gold and UK government bonds have been the only asset classes to record an increase in July, rising 6pp and 2pp from last month to 36% and 19% respectively.

Despite an eight percentage point decline, net sentiment remains strongest for UK property at 47%, whilst gold remains strong at 36%.

{desktop}{/desktop}{mobile}{/mobile}

Ashish Misra, head of portfolio specialists at Lloyds Bank Private Banking, said: “We are witnessing a classic response from investors during this dramatic time in the Eurozone.

“While riskier assets, such as Eurozone shares go down due to the economic uncertainty, ‘safe haven’ assets such as gold and UK government bonds increase due to their flight-to-safety behaviour typical of investors in such market conditions.

“The significant jump we saw last month for UK shares also shows that the euphoria post-general election is moderating and correcting back to pre-election levels.

“Overall, despite the results making for some bleak reading, we may see, at best, a visible pop-up in performance next month for Eurozone shares, or at worse, a flat lining of results.”

Eurozone shares (-48%) and Japanese shares (-1%) are the only two asset classes to currently sit in negative sentiment as the large drop in the value of Chinese equities in the past month has likely taken its toll on sentiment for Japanese shares and Emerging markets.

In line with asset class sentiment, actual market returns show nine out of ten classes reporting a decrease in the past month. In terms of returns earned, there was a decrease during the past month for all but UK Government bonds, improving 0.4%. Eurozone, UK shares and Emerging market shares all saw the largest decrease in returns of -5%, reflecting investor sentiment towards the asset classes.