Investor Fears on Euro-Area Breakup Risk Just Hit a Record LowBy
Here’s the latest sign that political jitters are haunting fewer money managers in Europe: The Sentix Euro Break-Up Index, which reflects the probability that a regional member will leave the common currency within 12 months, just tumbled to the lowest since the poll began in 2012.
The reading in January of 6.9 percent comes from a monthly survey of about 1,000 institutional and retail investors and it shows optimism over the sustainability of the single-currency bloc is at a post-crisis record. Besides Italy and Greece, no other European economy is deemed to have a chance greater than 1 percent of leaving the euro zone.
Political risk has proved to be all bark and no bite over the past year, as populist candidates largely failed to usurp establishment parties. The 19-nation trading bloc is basking in its strongest growth in a decade while equity and credit markets surf a profit wave. The latest sign: The French economy expanded for a fifth straight quarter, delivering its best full year since 2011, data Tuesday show.
One notable outlier in the bullish sentiment that’s sweeping the region: Italy’s general election in March may be weighing on the performance of the country’s credit-default swaps.
The Sentix index reached a record high of 73 percent in July 2012, at the height of the sovereign and banking crisis. The poll was conducted Jan. 25-27.