A closely-watched gauge of investor sentiment in the eurozone surged to a decade high in October, boding well for a region which has been struggling to shake off the shackles of a protracted period of slow economic growth since the financial crisis.
The Sentix Economic Index, which is based on a survey of 992 investors, rose by 1.5% to 29.7 points in October when compared with September, according to the Frankfurt-am-Main-based research institute Sentix, which conducted the survey, Nasdaq reported.
Sub-indices assessing investors’ views of the current situation as well as future expectations also posted month-on-month gains, with the former rising by 2 points to 41.8 points while the latter advanced by 1 point to 18.3 points.
“Regardless of all the political currents in the eurozone, investors see not only the core zone of euroland in a better way in economic growth, but also increasingly the troubled countries of the south. This should increase pressure on the European Central Bank to drive a more restrictive course in monetary policy,” Manfred Huebner, managing director of Sentix, said in the report.
“The first economic test after the German parliamentary elections can be seen as successful,” Sentix said in a statement, adding: “The global economic engine continues to gain strength.”
Expectations for economic developments in the eurozone rose to 18.3 from 17.3.
An index tracking Germany, the eurozone’s biggest economy, climbed to 37.7 from 34.0 in September. Sentix said the prospect of a coalition between Chancellor Angela Merkel’s conservatives, the pro-business Free Democrats and the Greens after an election on Sept. 24 was viewed optimistically by investors.
“If nothing goes wrong in the expected formation of a government, the coming months are likely to see strong economic growth,” said Sentix. “However, there is significant potential for disappointment if there is a power vacuum in Berlin.”
Meanwhile, in the south, Spain, the eurozone’s fourth largest economy, is facing a secessionist challenge from leadership in its northeastern region of Catalonia. How the situation plays out there, where it is considered the biggest constitutional crisis the country has seen in decades, could have implications for other countries which have separatist movements in the eurozone.
