Investors in the euro zone felt more upbeat in January as they shrugged off the lack of a new government in Germany and the global economy picked up, a survey showed on Monday, but research group Sentix warned there was a risk of overheating.
Sentix’s index for the euro zone, based on a survey of 929 investors, rose to 32.9 in January from 31.1 in December. That beat the Reuters consensus forecast for a reading of 31.5 and came after a hefty fall at the end of last year. A subindex tracking the current situation hit its highest level since August 2007.
The Frankfurt-based research firm said: “The economy in all regions of the world is looking stable and positive and is showing moderate improvements,” adding that this applied to regions including the euro zone, Eastern Europe and Latin America.
It said businesses did not seem to be bothered by the absence of a new coalition in Germany, Europe’s largest economy, which has been managed by a caretaker government since a September election. An index tracking Germany increased to 40.1 in January from 39.1 the previous month.
Confidence in the industrial sector, which was already at its highest level, increased more than economists had expected. The official confidence index reflects the optimism shown by recent private sector surveys, and the Markit index of manufacturing purchasing managers hit a record high last month. The confidence index for service companies rose more than expected, reaching its highest level since the summer 2007, before the onset of the global financial crisis. At the same time, consumer confidence rose to the highest level since January 2001, confirming earlier estimates of private statistical institutions. The Eurozone outperformed all expectations, even the most optimistic ones last year, which was worried about political uncertainty and its impact on economic performance. The European Central Bank expects the Eurozone economy to expand by about 2.4% in 2017, compared to last year's estimates of 1.7%. The central bank has raised its growth estimates for the next two years in its last meeting in December.
On the other hand, European shares registered highest level in more than two years in early trading on Monday, while confidence in the global growth has boosted the appetite of investors for global stocks. Sentiment has been boosted by the booming auto sector, renewed deal-making and the better-than-expected forecasts from Dialog chip industry. The semiconductor sector boosted morale, and the Stoxx 600 jumped up 0.4% to levels it didn’t seen since August 2015.
The European stock index shed some of its gains to rise 0.1 by 0826 GMT. Germany's DAX rose up 0.2 % and the British Financial Times 100 to 0.1%. The European auto sector index led sectors up 0.8%, the highest level since May 2015, and Italian car maker Fiat Chrysler rose 2.2%, French Peugeot 1.6% and BMW 1.4%.
Dialog shares have been hit recently by investors' fears that Apple may lose its most important customers, but the stock rose 3.5% Tuesday after the company reported sales of $ 463 million, according to preliminary data in the fourth quarter, exceeding the upper range of expectations announced in November.