Milan’s Duomo cathedral has reopened following temporary closure owing to the spread of coronavirus. Image source: Valeria Ferraro, Getty Images
The positive news in the Eurozone continues to stack up following yesterday's decision of the European Commission to unleash more fiscal support for the hard-stricken economies in Southern Europe.
Today it was announced that the overall economic sentiment in the Eurozone has managed to rise moderately in May from the record low that was recorded the previous month.
Eurozone Economic Sentiment. Image source: TradingEconomics.com
Even though the expectations of people and business within the Euro-Area are still far from the high spirits that were observed prior to the coronavirus pandemic, the marginal stabilisation means that the initial market shock has been handled.
This is the first major step that had to be achieved regardless of the shape and timing of the recovery process that lies ahead. The recorded optimism, however, is not the same across all aspects of the economy.
It was reported that the overall sentiment within the manufacturing and retail sectors improved, alongside the optimism of consumers. In contrast, the outlook on the services sector, which remains the most essential part of the Eurozone's economy, deteriorated for the third consecutive month, reaching a new record low.
As lockdowns ease and the economic activity in Europe begins to pick up steam once again gradually, the general sentiment within the Euro-Area would have to continue improving if a long and sustained recovery is to be achieved.
Overall, European stocks continued to rise today as the news of eased restrictions alongside fewer new cases of COVID-19 prompted investors to bet on the continuation of the current bullish run.
German stocks continue to make the strongest progress, as the EU's largest economy was among the first to slow down the spread of the deadly pathogen and thereby reverse the rate of infection.
This, in turn, underlines the inverse relationship between the observed severity of the epidemic in a given country and the expectations for a quick recovery following its peak.
In other words, investors do not seem to expect the coronavirus epidemic to expose hidden weakness within the broader economy of the Eurozone, which would have triggered a cascade effect resulting in a long-lasting recession.
Even though the true scope of the crisis is yet uncertain, the uninterrupted stock market rally underlines the aforementioned optimism amongst investors, which at least for now seems to suggest that the worst is over.
Meanwhile, the German DAX continues to outperform both the French CAC 40 and the composite EU 50.
European Indices Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
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