German investor sentiment tumbles to over 7-year low

13.08.2019 15:45|Daniel Kostecki

Data released today for Germany and the euro area show quite clearly that it is difficult to find optimists on the market who would predict a recovery. Quite the opposite – sentiment get worse from month to month to levels that have not been observed for years.

The increasing risk of recession in the largest economy of the eurozone has effectively influenced the pessimistic assessment of the economic situation by investors and the reading of the expectations index of the ZEW institute (Zentrum fur Europaeische Wirtschaftsforschung - European Center for Economic Research based in Mannheim). The index fell in August to -44.1 points, which means a drop by as much as 19.6 points compared to the reading a month before. What's more, this is the fourth month in a row of the decline and the lowest publication since December 2011.

The German economy probably shrunk in the second quarter due to the ongoing trade war, which resulted in a decline in demand and hit exports. Big companies: Lufthansa, Daimler or Continental warn against a worsening situation. This, in turn, may affect the German DAX index available on the Conotoxia platform under the symbol DE30.

DE30, weekly chart

DE30, weekly chart. Conotoxia trading platform

The German index is trying today (13 August) to break the support given by the bottom from the first half of June. Theoretically, if the bears' attack succeeds, then the chances of a double-top pattern could increase.

Today we also got the reading of the ZEW economic sentiment index for the entire euro area, which thanks to the weight of Germany in measurements fell to -43.6 points. It is also the lowest value of 2011 and the fourth month of decline in a row. Research shows that more than half of those surveyed, 53.9 percent, expect a deterioration in economic activity, 35.8 percent does not expect any changes, and barely 10.3 percent. expecting improvement.

Such negative sentiment regarding the economic situation may put pressure on the European Central Bank and expectations of a loosening of monetary policy. The next ECB meeting will take place on September 12.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

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