BERLIN (Reuters) - Investor sentiment in the euro zone recovered in August, a survey showed on Monday, as markets digested the initial shock of Britain's vote to leave the European Union and took a sanguine view of its future impact.
The Frankfurt-based Sentix research group's index rose to 4.2 from 1.7 in July. Analysts polled by Reuters had expected a reading of 3.0.
"The Brexit shock only lasted a short while. Worries about an economic slowdown have not grown further," Sentix said in a statement.
Last week's move by the Bank of England to cut interest rates and unleash billions of pounds of stimulus has also heartened investors, with a recession in Britain now appearing less likely, Sentix said.
Reflecting the improved mood, the sub-index measuring expectations rose to 4.8 from -2.0 in July.
However, the sub-index gauging the euro zone's current conditions deteriorated to 3.8 from 5.5, marking the lowest reading since February last year.
The euro zone economy has so far showed a degree of resilience to Britain's shock vote to leave the EU, with euro zone economic sentiment improving last month.
An index tracking Germany showed the mood in Europe's largest economy improved to 19.8 from 18.4. Investors were more positive about the outlook for Germany and the index measuring expectations rose to 7.0 from 2.7.
Economists also expect Europe's powerhouse to weather the impact of Brexit better than originally feared.
The DIW economic institute said last week economic growth in Germany would be reduced by 0.3 percent as a result of the British vote. It had previously forecast a reduction of half a percentage point.
The Ifo economic institute sees Brexit shaving 0.1 percentage points off growth this year.