Euro Investor Confidence Down by a Hair; Market Response Offset by Positive Weekend Developments
THE TAKEAWAY: European confidence down -> investors fear credit crisis and dropping consumption -> Euro strengthened by weekend US data
The Sentix Investor Confidence rating, which measures investor confidence in the Eurozone, came out marginally lower than expected today at -18.5% versus the projected -18.0%. The figure represents the third straight month of decline in European investor confidence, and the lowest figure since July 2009. September and August of this year saw declines of 15% and 13%, respectively, and a breakdown of today’s data showed that a gauge of European business conditions plummeted from -3.25 to -5.75, while business expectations dropped to -30.5 from an already-low -26.75.
Today’s announcement comes on the heels of a prolonged crisis in the European economy, with Greece ever more likely to default on loans and spark a deep credit crisis. Recent industrial growth numbers from the Eurozone have been weak, and analysts have blamed weak export and manufacturing data on decreased domestic and foreign demand.
Some welcome news (which may have contributed to today’s data being less bad then it could’ve been) came this weekend with an announcement that France’s Sarkozy and Germany’s Merkel have agreed to the terms of a comprehensive stimulus package, an issue over which the two nations had previously squabbled. Also helping to bolster sentiment this weekend were positive French and Italian manufacturing and industrial data – significantly, Italian industrial production in August rose a whopping +4.7%, versus the anticipated small increase of +0.2%.
The market reaction to the Sentix rating was muted as the Euro continued its climb against the Buck. Better-than-expected US job data released Friday has bolstered risk sentiment, contributing to a move away from the safe Dollar into riskier assets. However, investors should be warned that any additional upside could be limited today with US markets closed for Columbus Day.
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