Investor confidence in Eurozone appears to be staying on shaky ground, as evidenced by the dip in Sentix Investor Confidence from -21.5 to -21.9 for October. While this decline was milder than the anticipated drop to -24.0, it still casts a shadow on the economic climate of the region.

The more granular aspects of the report offer a mixed picture. Current Situation Index slipped from -22.0 to a low of -28.0, a trough not seen since November 2022. Conversely, Expectations Index, which forecasts sentiments for the coming six months, exhibited a rally, climbing from -21.0 to -16.8, marking its zenith since April.

Sentix noted, “The economic situation in the Eurozone remains difficult.” While the uptick in Expectations Index could provide a glimmer of hope, Sentix tempers this optimism by clarifying that it “does not yet indicate a turnaround.” Instead, it might simply imply a slowing down in the waning momentum.

Additionally, Sentix noted investors perceive ECB as somewhat hamstrung in its ability to intervene. The bank’s typical proactive stance in assisting a faltering economy is “not yet discernible.”

Shifting focus to Germany, the data presents a narrative akin to Eurozone. The Overall Investor Confidence experienced a minor lift, moving from -33.1 to -31.1. Yet, this was counterbalanced by Current Situation Index, which not only fell from -38.3 to -39.5 but also reached its nadir since July 2020. On a positive note, Expectations Index saw a boost, rising from -27.8 to -22.3.

Full Eurozone Sentix release here.

ECB President Christine Lagarde said in a speech the central has given itself some “extra space” in monetary policy by stating that rate hike will come only “some time” after ending net asset purchases.

“This maintains our traditional sequencing logic, but also gives us extra space if needed after we stop purchasing bonds and before we take the next step towards normalization,” she said. “This will allow us to test whether the convergence of inflation to our target that we project today is robust to current and potential new shocks,”

Lagarde also said the outbreak of war has ” introduced new uncertainty into the outlook”, with ” the short-term factors pushing up inflation are likely to be amplified.” Inflation out hit 5.1% on average hits year, and even exceed 7% in the “severe scenario”.

Full speech here.

ECB Chief Economist Philip Lane said in an interview that “we expect to raise rates further”. But “each meeting is different” and “one platform for considering a very large hike, such as 75 basis points, is no longer there.”

“When we were at zero, that did not correspond to anyone’s idea of the interest rate level necessary. Going to 1.5 per cent is still below where we need to go,” he said. “But the more you’ve already done on a cumulative basis, that changes the pros and cons of any given increment.”

“I don’t think December is going to be the last rate hike” he said. “Trying to jump forward to February, to March, to May or June next year, I think it’s too early to have very strong views at this point… The more relevant argument than whether to pause is to move at the appropriate time to smaller increments.”

Full interview here.