European consumer sentiment index rises

Europeans’ confidence in the Continent’s economy increased more than expected in October, underpinning stock market gains but also underscoring the European Central Bank’s concern about inflation.

An index of sentiment among executives and consumers in the dozen nations sharing the euro currency rose to 110.3 last month, the highest since 2001, from 109.3 in September, the European Commission said Tuesday.

By contrast, an index of U.S. consumer confidence edged lower last month, the Conference Board reported Tuesday.

Europe’s economy is set to expand at a 2.4% rate this year after inflation, the fastest pace since 2000, the International Monetary Fund estimates.

That still would be slower growth than in the United States or Japan. But the improved growth outlook in Europe has helped to boost employment and buoy the region’s stock markets.

France’s unemployment rate declined to a five-year low of 8.8% in September from 9% in August, the government said Tuesday.

France’s CAC-40 stock index rose 1.9% in October and is up 13.4% year to date, better than the 10.4% rise in the U.S. Standard & Poor’s 500 index.

The German stock market jumped 4.4% last month and is up 15.9% this year.

Because the euro has strengthened against the dollar this year, European stock gains have been inflated for U.S. investors in those shares. The French market is up 22.4% in dollars; the German market is up 25.1%.

Those gains have helped continue to draw many American investors to foreign stock mutual funds this year, at the expense of domestic funds.

But as growth picks up in Europe, so does the likelihood of further increases in short-term interest rates. The European Central Bank raised its key rate to 3.25% on Oct. 5, from 3%, and signaled that it was ready to boost rates again in December to head off inflation pressures.

Politicians are concerned that the central bank risks damaging the growth outlook. Luxembourg’s finance minister, Jean-Claude Juncker, last week warned policymakers to “keep in mind the possible effects that a rate rise could have on economic growth.” Juncker also heads the committee of euro-region finance chiefs.

*

Begin text of infobox

Hot month

Changes are measured in local currencies. Stock markets worldwide saw hefty gains in October. A sampling:

*--* Pctg. change: Country/index Oct. YTD Brazil/Bovespa +7.7% +17.4% Mexico/IPC +5.1 +29.5 Canada/S&P-TSX; +5.0 +9.5 Australia/All Ord. +4.7 +13.7 Germany/DAX +4.4 +15.9 India/Sensex +4.1 +37.9 U.S./S&P; 500 +3.2 +10.4 Britain/FTSE +2.8 +9.1 France/CAC +1.9 +13.4 Japan/Nikkei 225 +1.7 +1.8

*--*

*

Source: Bloomberg News

Los Angeles Times