Eurozone investor sentiment improves as Covid cases fall

Investor sentiment strengthened across the Eurozone in February, a closely-watched survey showed, beating expectations.

The headline Sentix Economic Index came in at 16.6 compared to 14.9 in January and well above consensus expectations of 15.2. It was also the highest reading since November.

Within that, the current situation index rose to 19.3 from 16.3, while the expectations index came in at 14.0, the highest reading since July 2021.

Manfred Hübner, Sentix managing director, said the economic situation in the Eurozone had stabilised. But he cautioned that the region continued to face slower growth. "Our assumption that we are in a mid-cycle slowdown, that is, a growth moderation in the middle of an economic cycle, remains unchanged," he said.

"This phase of moderation is not yet complete. There is a lack of sustainable new growth drivers. Above all there is a lack of impetus from the international economy."

In the US, the overall index eased to 22.1 from 23.3 in January, the third decline in a row. South America came in at -1.4, though that was an improvement on January’s -5.1, while in Asia excluding Japan the index eased 0.3 points to 21.4.

The global index was 17.0, just 0.1 point up on the previous month.

"The Eurozone is unable to create sufficient growth momentum of its own," Hübner added. "On the contrary, in the coming weeks and months, monetary policy headwinds in particular are likely to increase."

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said: "Investor sentiment improved in February as it seems the fall back in virus cases and, in some countries, easing of restrictions, provides for a better outlook for the economy.

"[It] suggests that markets believe economic growth will pick up from the fourth quarter’s measly 0.3% this quarter, and remain strong over the coming year. While we agree that growth will snap back from the second quarter, we suspect it is slowing and that the first quarter will be another weak quarter for the Eurozone economy.

"Looking ahead, we see downside risks to sentiment as monetary policy tightening in the Eurozone becomes a very real prospect."

Sentix surveyed 1,205 investors, 266 of which were institutional investors, between 3 and 5 February.