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Eurozone Investor Confidence Plummets

James Boston
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Investor Confidence in the Eurozone has plummeted according to the latest Sentix Investor Confidence report for the economic bloc. The September number is now reading at -9.8 compared to 2.7 in August, given the deteriorating economic situation expectations were for a fall in this reading but only to around 2.0. This is the first time Investor Confidence has turned negative since the middle of 2013.

The hit to investor sentiment comes despite the fact that the European Central Bank (ECB) crossed the line last week and abandoned it’s resistance to quantitative easing. Low growth prospects, low inflation and a string of bad economic data has evidently taken it’s toll on Eurozone investors and the ECB’s perceived softly softly approach in the face of economic deterioration has eroded investor’s confidence in the institutions ability and willingness to take the necessary measures to rectify the situation.

The ECB has put itself in a situation, at least as far as investors are concerned, that it now has to clearly demonstrate it’s policies taking effect in order to regain the confidence of the markets. This is not an impossible task, the concrete moves that the Bank took at it’s policy meeting last week will offer some solace to those who had been growing impatient at the ‘wait and see’ approach that was not yielding the sought after results. The 10 basis point rate cut will not have any direct effect on the economic situation, it was somewhat symbolic but it may encourage a fuller take up of this month’s €400Bn TLTRO initiative designed to target credit to specific areas of the economy. The real departure has come in the form of the announcement that the ECB will embark on a program to purchase asset backed securities and covered bonds, although the magnitude of this is unknown and it is not quite full scale quantitative easing, it does represent definitive action on the part of the ECB and this should contribute to restoring some investor faith.

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