Euro Area Investor Sentiment Improves More Than Expected at the Start of 2026

Investor morale in the euro area improved more than anticipated at the beginning of 2026, reaching its highest level since July 2025, supported by a sharp rise in expectations. Despite the improvement, overall sentiment remained in negative territory.

The investor confidence index rose to -1.8 points in January from -6.2 in December, outperforming expectations for a more modest improvement.

The improvement was driven primarily by a strong rebound in forward-looking expectations. The expectations component more than doubled compared with the previous month, climbing to 10.0 in January.

While the euro area—and Germany in particular—continues to face structural challenges, there are growing signs that economic conditions may be bottoming out. At the same time, stronger momentum from the United States and parts of Asia is helping provide fresh support for global growth.

The index measuring the current economic situation also showed improvement, rising to -13.0 in January from -16.5 at the end of 2025.

Sentiment in Germany, the euro area’s largest economy, strengthened notably as well. The overall sentiment index for Germany improved to -16.4, its highest reading since August 2025, up from -22.7 in December. Expectations turned positive, increasing to 5.5 from -1.3 a month earlier.

Despite these gains, analysts cautioned that the indicators assessing current conditions remain deeply recessionary. Even with the recent improvement, the current situation measure stood at -36.0 points, underscoring that economic activity remains weak despite emerging signs of stabilization.