In a surprising turn of events, investor sentiment in the euro zone experienced a notable rebound in May, recovering from a sharp decline driven by U.S. tariffs announced by former President Donald Trump. The Sentix index, a key indicator of investor confidence, rose to -8.1 from -19.5 in April, exceeding expectations of a more modest increase to -12.5.
"This recovery is quite remarkable, indicating a shift in investor perspective as fears of recession that plagued last month have significantly dissipated," stated Sentix in their latest report. The survey, conducted with 1,068 investors from May 1-3, suggests a growing confidence in the resilience of the euro zone economy, especially in light of the EU Commission's measured response to the U.S. tariff impositions.
The current situation index also showed positive momentum, climbing to -19.3—its highest level since August 2024—even though it remains in negative territory. Meanwhile, expectations surged by an impressive 19.6 points, reaching a reading of 3.8. This upswing can be attributed to the stabilizing impact of the euro zone’s strategic management of the tariff situation, particularly in Germany, the continent's largest economy, where expectations soared by over 20 points to 5.5.
"The primary casualties of Trump’s tariff strategy appear to be the U.S. economy, along with notable repercussions for China and Switzerland,” remarked Sentix. “However, we must remain cautious, as the uncertainty surrounding trade policies is likely to persist."
The recovery in sentiment is a critical indicator for the euro zone's economic outlook, particularly as it navigates the complexities of global trade relations. Analysts emphasize that while the latest data is encouraging, the long-term effects of ongoing tariff disputes and economic policy shifts remain to be seen.
