(menafn – ecpulse)
German investor confidence causes improvement in the sentiment after showing better than anticipated rise for the fifth consecutive month in April after the rise in bond yield at a Spanish debt auction.
German ZEW survey economic sentiment rose to 23.4 in April, the highest level in nearly two years, defying analysts' expectations of seeing a drop to 19.0, compared to March's reading of 22.3. The current situation reading also exceeded both forecasts of 35.0 and the prior reading of 37.6 as it came in at 40.7.
The index showed progress despite the tensions spreading in markets after the rise in Spanish bond yield to levels close to those forced euro area members, specifically, Greece, Portugal and Ireland, to ask for international bailouts.
Probably, the advance came on the back of hopes the euro area's largest economy will escape recession this year after the drop in unemployment to the lowest level in two decades which will ease pressure on consumer spending.
The euro rose against the dollar following the release of the report to trade around 1.3155 compared with the day's opening level of 1.3140.
Yet, uncertainty is predicted to remain predominant as the European debt crisis is not over yet, especially as concerns aggravated this week after the rise in Spanish bond yield.
Yesterday, Spanish 10-year notes yield breached 6%, while the Spanish cost of insuring against default, known as Credit Default Swaps (CDS), resumed its soar to yesterday 523 basis points from 499 basis points on Friday.
Spanish minister urged the European Central Bank to intervene to halt the rise in cost of borrowing, while Spanish Prime Minister Mariano Rajoy said his country must cut budget shortfall to continue having access to financing.
Today, Spanish debt auction saw a rise in yields as the selling of 12- month notes recorded a rise to 2.62% from 1.42% at an auction on March 20, while the 18-month securities produced a yield of 3.11% versus 1.71% at a prior auction.
This week, euro area officials will seek global assistance when they conduct talks with the IMF in Washington.
Moreover, data from the euro zone released today showed that ZEW survey the economic sentiment gauge for the same month soared to 13.0 from a prior of 11.0.
Other data from the euro area showed that CPI rose to 2.7% in the year ended March from both prior and excepted readings of 2.6%. The month on month reading came in at 1.3%, above forecasts of 1.2% and the prior of 0.5%.
It seems that the pressure is coming from the rise in crude oil prices, which closed the month of March at 103.08 a barrel after hitting a high of 110.53.
The rise in inflation may sap efforts by the ECB to boost liquidity as it may be prompted to halt its non-standard measures to avoid inflationary pressures.