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Euro area economic index stabilizes in October: Sentix

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Euro area economic index stabilizes in October: Sentix

Investor confidence in euro area economics stabilized in October after the enormous rise the previous month, according to Sentix. The expert in behavioural finance said the composite index rose or moderated across emerging and developed markets, except for the United States, where the budget crisis weighed down investor confidence.

The monthly report measures the prevailing trends and attitudes among 1,600 financial analysts and institutional investors regarding the current economic situation and future expectations. The euro indicator fell 0.4 points over the previous month to 6.1, well below expectations for 8.0. The slight drop can be viewed as a stabilization effort, as the euro area returns to health. A reading above zero indicates overall optimism toward the economy, whereas a reading below zero indicates pessimism. The current value indicates investors expect annualized GDP to have stabilized this quarter.

The biggest factor holding back the euro area last month was uncertainty surrounding the new German government, as well as its perceived policies toward the currency block. Angela Merkel’s
conservative government won its third consecutive term last month, after the Christian Democratic Union of Germany and the Christian Social Union of Bavaria secured 311 out of 630 seats. Merkel has taken a tougher stance on cash-strapped euro members, as she attempted to prove to voters Germany would not bear the burden of more financial aid packages. Greece is reportedly seeking a third bailout in the vicinity of €10 billion.

The only country to move downward against the general trend was the United States. Its overall confidence index fell eight points to 16.8, as sentiment surrounding the current situation and six-month expectations fell. Over the past several weeks the market’s attention has shifted to the budget ceiling debate, which continues to divide Democrats and Republicans. According to Treasury Secretary Jacob Lew, the government risks default if lawmakers are unable to reach an agreement by October 17, when the government will have exhausted its borrowing authority.

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