Investor sentiment in the euro zone gained more than anticipated in October, a survey done by the Sentix showed.
Sentix Economic Index, which is located in Frankfurt and is based on a survey of 992 investors, rose by 1.5 points to 29.7 points in October when compared with that of September. This Sentix reading beats a consensus conducted by other news arms.
Sub-indices, in which investors’ outlook and opinion on current turns and twists in the economy as well as projections for the future are measured, also exhibited optimistic month-on-month gains.
“Regardless of the political currents in the euro zone, 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 ECB [European Central Bank] to drive a more restrictive course in monetary policy,” said Manfred Huebner, who is the managing director of Sentix.
This optimistic gauging of investor sentiment comes after Germany’s Bundestag elections, which witnessed Chancellor Angela Merkel seated to power for a fourth term in office.
“The first economic test after the German parliamentary elections can be seen as successful. The global economic engine continues to gain strength,” said Sentix in a statement.
Germany is the euro zone’s largest economy, and an index tracking the country crawled up to 37.7 from 34.0 in September. According Sentix’ projection, investors are viewing the possible coalition between Merkel’s conservatives, the pro-business Free Democrats (FDP), and the Greens in an optimistic light.
“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.”
Aside from the German election, the European Union is also in a great struggle to re-assert its importance as Britain, which is a key member of the Union, negotiates its terms for a departure (also known as Brexit) from the group.
Meanwhile, in the southern part of the region, the euro zone’s fourth largest economy, Spain, is presently facing a secessionist challenge coming from Catalonia, which lies in the country’s northeastern region. An independence referendum, which was announced as unconstitutional by the Spanish government, turned violent and negatively influenced the euro against other currencies.
The standing challenge is considered the country’s biggest constitutional crisis in decades since becoming a democratic region. It could also have certain implications for other nations that similarly have separatist movement in the euro zone.
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