Eurozone sentiment deteriorates more than expected in January

Economic sentiment in the Eurozone worsened more than expected in January, according to the latest survey released by Frankfurt-based research group Sentix.

The index gauging economic confidence among investors slid to 9.6 from 15.7 in December, missing expectations for a reading of 12.2.

Meanwhile, the sub-index tracking expectations for the Eurozone’s economy over the next six months tumbled to 6.3 in January from 18 in December, while the index tracking Germany fell to 18.1 from 22.7.

The current situation index nudged down to 13 from 13.5 in December.

“This is a downbeat headline, but not unexpected given the atrocious start to the year for equities,” said Pantheon Macroeconomics.

“Fears over China’s devaluation—as an omen of a hard landing in the economy—and increased global deflation risks likely will linger in the short run. But we think both equities and sentiment will recover in coming months, as the continuation of QE and a stable cyclical recovery remains important tailwinds. We think Eurozone equities will do well over the first quarter as a whole.

“In the short run, though, the chart shows that investor sentiment is still trending down, and the more widely watched ZEW index later this month likely will be poor too.”