Euro zone investor morale hits 10-year high in October

[BERLIN] Investor sentiment in the euro zone rose more than expected in October, hitting a 10-year high in its first reading since Germany held national elections two weeks ago, a survey showed on Monday.

The Frankfurt-based Sentix research group's euro zone index rose to 29.7 points from 28.2 in September. The October reading beat a consensus forecast of 28.5 in a Reuters poll of analysts.

Investors viewed the euro zone's current conditions favourably, with a sub-index rising to 41.8 from 39.8 in September.

"The first economic test after the German parliamentary elections can be seen as successful," Sentix said in a statement, adding: "The global economic engine continues to gain strength." Expectations for economic developments in the euro zone rose to 18.3 from 17.3.

An index tracking Germany, the euro zone's biggest economy, climbed to 37.7 from 34.0 in September. Sentix said the prospect of a coalition between Chancellor Angela Merkel's conservatives, the pro-business Free Democrats (FDP) and the Greens after an election on Sept 24 was viewed optimistically by investors.

"If nothing goes wrong in the expected formation of a government, the coming months are likely to see strong economic growth," said Sentix.

"However, there is significant potential for disappointment if there is a power vacuum in Berlin."

REUTERS