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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.

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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."