German investor sentiment improves

FRANKFURT — Investor sentiment is cautiously improving in Germany, as fears about a break-up of the euro have eased somewhat in recent weeks, data showed on Tuesday.

By (AFP)

Published: Tue 16 Oct 2012, 5:19 PM

Last updated: Tue 7 Apr 2015, 11:49 AM

Nevertheless, investors’ assessment of the current situation in Europe’s top economy is worse than it has been since June 2010, the data showed.

The widely watched investor confidence indicator calculated each month by the ZEW economic institute rose for the second month in a row after hitting its lowest level this year in August.

The ZEW barometer rose to minus 11.5 points in October from minus 18.2 points in September.

The reading was better than expected. Analysts polled by Dow Jones Newswires had forecast a more modest rise to minus 15 points in October.

“This is the second consecutive rise in the indicator,” ZEW said in a statement.

“It shows that, from the point of view of financial market experts, the economic risks for Germany have lessened somewhat. The easing of uncertainty on the markets in recent weeks has contributed to this,” the statement said.

While there were still more analysts predicting a cooling down of the German economy than an improvement, “the proportion ... has shrunk,” ZEW added.

The European Central Bank’s decision last month to launch a new bond purchase programme for debt-wracked countries seems to have helped turn around sentiment towards the euro.

But the crisis is still far from over yet.

A separate indicator measuring financial market players’ view of the current economic situation in Germany fell further to a reading of plus 10.0 points in October from plus 12.6 points in September.

That is the lowest level since June 2010.

For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

A frequent criticism against it is that the index can be volatile and is therefore not particularly reliable.

“Of course, the ZEW index is not the most credible leading indicator for the German economy,” said ING Belgium economist Carsten Brzeski.

“Still, today’s ZEW index adds to the evidence of a soft, not a hard, landing of the German economy. The negative impact of the never-ending euro crisis and, even more important, of the global economic cooling should become visible in the second half of the year,” he said.

Berenberg Bank economist Christian Schulz also believed that “the second successive rise in German investor expectations raises hopes that the economy may leave stagnation behind and return to growth soon.”

Relatively stable financial markets and declining sovereign yields “seem to be reassuring investors increasingly that the ECB is ready to do enough to contain the euro crisis. With the ECB’s safety net against market panics, business and consumer confidence can return and improve growth prospects at least in those countries, such as Germany, where no harsh austerity affects domestic demand,” Schulz said.

But while the outlook was improving, investors saw the current situation of the German economy as still close to stagnation, the analyst noted.

Natixis economist Constantin Wirschke said the ECB had “reduced the stress in the markets and led to more positive overall economic expectation, albeit these expectations come from an exceptionally low level.

“Conclusively, the numbers can be seen as a positive sign, but risks to Germany’s still relatively robust growth still remain,” Wirschke said.