European investor confidence declines more than forecast

Index measuring sentiment in the euro zone fell to lowest point since December after Cyprus bank crisis

An index measuring sentiment in the euro-area fell to its lowest point since December, after the Cypriot bailout pushed up the price of insuring against default for banks across the euro area. Photograph: Radu Sigheti/Reuters

An index measuring sentiment in the euro-area fell to its lowest point since December, after the Cypriot bailout pushed up the price of insuring against default for banks across the euro area. Photograph: Radu Sigheti/Reuters

Mon, Apr 8, 2013, 11:28

European investor confidence declined more than economists forecast this month, after the bail-in of Cypriot bank depositors rattled financial markets, the Sentix research institute said today.

An index measuring sentiment in the euro-area fell to minus 17.3 from minus 10.6 in March, the Limburg, Germany-based institute said. That's the second drop in a row and the lowest reading since December.

Economists had predicted a decline to minus 12.8, according to the median of 18 estimates in a Bloomberg News survey. A gauge of economic expectations decreased to 0.5 from 8.3, while a measure of current conditions fell to minus 33.5 from minus 27.8.

Cyprus is gradually easing the first capital controls in the euro's history after depositors were called on to contribute to a bailout that will reshape the island nation's banking industry. That pushed the price of insuring against default higher for banks across the euro area, adding to obstacles to economic recovery for the 17-nation region.

"While it was the Italian election that handed the index a setback in March, in April it is, among other things, the Cyprus problem that is depressing it further," said Sebastian Wanke, an economist at Sentix.

"At the moment there's little nourishment for optimists on the economy."

Confidence in Germany, Europe's largest economy, also fell in April, to 17.6 from 24.5. Still, recent weakness in data should only signify a temporary dent in the euro area's recovery even as the risks surrounding the economic outlook are worsening, Sentix said.

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