Euro zone sentiment rises in May as Italy, Cyprus worries ease

Euro zone sentiment improved in May as investors' views on the outlook for the currency bloc steadied following two months of declines sparked by uncertainty in Cyprus and Italy.

Sentix research group said on Monday its monthly index tracking investor sentiment in the 17-nation currency bloc rose to -15.6 in May from -17.3 in April, just short of the consensus in a Reuters poll of economists for -15.2.

"While investors' assessments of the economy for the euro zone are stabilizing, those for Germany are clouding a little, albeit at a significantly higher level," Sentix said in a statement.

Sentix said an inconclusive election result in Italy and an international rescue package for Cyprus had weighed on the euro zone index in the previous two months.

A right-left government finally took power in Italy in late April, some two months after the election there, while in Cyprus the parliament approved the painful bailout plan.

A sub-index of euro zone expectations rose to 2.8 from 0.5 in April, while the index on Germany fell to 15.2 from 17.6 in April.

While Germany - Europe's largest economy - initially warded off the three-year old euro zone debt crisis, it contracted in the final quarter of last year. The government now sees growth of just 0.5 percent for 2013.

"It must be noted that the index for Germany at 15.2 moves at a much higher level than that for the euro zone at -15.6," Sentix said. "But ... investors are becoming aware again of the fact that Germany is not an island within the euro zone."

(Reporting by Annika Breidthardt, editing by Gareth Jones)