Investors unsure euro zone growth to stay strong in 2018: Sentix

BERLIN (Reuters) - Investor sentiment in the euro zone fell more than expected in December, research group Sentix said on Monday, adding that the fall was no reason for concern given the headline figure had been rising sharply and hit a 10-year high last month.

FILE PHOTO: The famous skyline with its banking district is pictured in early evening next to the Main River in Frankfurt, Germany, January 19, 2016. REUTERS/Kai Pfaffenbach/File Photo

Sentix’s economic sentiment index for the euro zone, based on a survey of 975 investors, fell to 31.1 in December from 34.0 last month.

It attributed the fall to a sub-index measuring expectations about the economy falling by six points.

“In the eyes of surveyed investors the euro zone is doing great, but looking forward there is a question mark,” the Frankfurt-based research firm said.

“Investors are asking whether 2018 can be even better, and are hedging their bets on the future by placing their expectations below those of September 2017,” it added.

It said the decline was no reason for concern as the fall had come after a 10-year high record readíng.

A separate index tracking Germany also fell. Sentix linked the fall to uncertainty created by Conservative Chancellor Angela Merkel’s failure last month to form a government with the ecologist Greens and the pro-business Free Democrats.

Merkel has turned to Social Democrats (SPD) in the hope of renewing a “grand coalition” with the centre left party that has ruled Germany for the last four years.

It said investors now wanted to know how expensive a tie-up with the SPD, who want to significantly increase investments on infrastructure and education, broaden a social security net and improve worker rights, would be.

“The price for a continuation of Merkel’s governance and for German finances could be high,” Sentix said. “Foreign investors will be particularly paying attention how high the additional spending will be and whether labour market conditions will worsen.”

Merkel, whose conservatives were weakened in an election on Sept. 24 that vaulted a far-right party into parliament, is seeking a fourth term.

Reporting by Joseph Nasr; Editing by Jacqueline Wong