Summary: Euro-zone composite sentiment index up sharply; well above expectations; results from major euro-zone economies all up; sovereign bond yields up, especially French yields; index now implies euro-zone GDP expansion.
The European Commission’s Economic Sentiment Indicator (ESI) is a composite index comprised of five differently-weighted sectoral confidence indicators. It is heavily weighted towards confidence surveys from the business sector, with the consumer confidence sub-index only accounting for 20% of the ESI. However, it has a good relationship with euro-zone GDP, although not as a leading indicator.
The ESI posted a reading of 110.3 in April, significantly above the market’s expected figure of 102.2 and well above March’s revised reading of 100.9. The average reading since 1985 has been just under 100.
Confidence improved across all five of the industry, retail trade, construction, services and consumer sub-indices. On a geographical basis, the ESI increased in Germany, France, Italy and Spain.
German and French 10-year bond yields finished the day higher. By the close of business, the German bund yield had gained 4bps to -0.16% while the French OAT yield had jumped 14bps to 0.16%.