Eurozone investor confidence rose sharply in May - Sentix

According to the report from Sentix, the economic situation in the Eurozone continues to improve. The sentix situation index rises for the third time in a row to 6.3 points (highest level since May 2019). The overall index (21.0) reaches its highest value since March 2018, meaning that the recession caused by the Corona crisis has been overcome. In Euroland, expectations even rise slightly to +36.8 points, an all-time high! This is very unusual and underlines that the very expansive monetary and fiscal policy that has been in place for a year has not failed to have an effect on the real economy. But where there is light, there is also shadow. There are increasing signs that the economy is being overstimulated. This is evident in individual sectors that report shortages of materials. However, the strong global economy is having an even stronger impact on commodity prices and thus on inflation.

The extent to which investors are concerned about rising inflation is reflected in the sentix thematic barometer for the bond market. The inflation sub-index falls to -45.25 points in May, also an all-time low. The inflation rates, which already surprised negatively in April, are thus likely to continue to rise significantly. This not only puts pressure on the bond markets, but is also likely to have an impact on central banks. Investors expect a signal soon that the current strong expansion of liquidity will be curbed. The sub-index central bank policy reacts significantly from +13.75 to -0.75 points. The period of strongly supportive central bank policy is thus coming to an end, which should also have an impact on the development of the risk markets.