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Euro area investor confidence hits six-month high in June

Staff writer |
Investors grew more confident about the prospects for the Eurozone and the global economy in June, according to the results of a widely-followed survey.

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The Sentix economic index for the Eurozone improved from 6.2 to a reading of 9.9, its best level since the start of 2016. A sub-index tracking investors' expectations for the euro area jumped from 5.5 in May to 10.0 in June.

"Investor sentiment is more volatile than economic survey data, but the economy is in a better shape when the headline investor surveys are holding above zero. Investors' sentiment, however, could be severely dented this month if the UK votes to leave the EU.

"Risk premiums in the FX market has widened hugely, indicating that FX traders are willing to pay a big premium to hedge against the risk of Brexit. If the polls being to show a clearer victory for Brexit in the coming weeks, we would expect a similar increase in equity volatility, which would dent sentiment," Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said in a research note sent to clients.

Confidence improved for all of the world's major geographical regions, and especially for the US, Sentix said. The research institute's headline global aggregate index of investor confidence rose from 2.7 to 6.1.

A gauge of expectations for the U.S. economy - in particular - improved remarkably, rising by six points in June to 6.8.

"Since the February trough at -8.8 points, expectations have increased by +15.6 points. The downward spiral of economic expectations, therefore, has come to an end as investors get more optimistic," Sentix said.

The only region that saw investors turn more wary was Latin America, with the headline index falling from -15.7 to -18.0.

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