German Investor Sentiment Improves as Tensions Ease, ECB Acts

(Bloomberg) -- Investor confidence in Germany’s economic outlook improved from an almost eight-year low after the European Central Bank stepped up its monetary stimulus for the euro zone and geopolitical tensions eased slightly.

ZEW’s index of expectations for the next six months rose to minus 22.5, compared with minus 44.1 last month. A gauge of expectations for the euro zone also improved, though a measure of current conditions in Germany worsened.

Europe’s largest economy contracted in the second quarter, putting it on the verge of a recession, as slower global growth and the U.S.-China trade war hit manufacturers. Companies including Continental, Lufthansa and Daimler have all slashed their outlooks in a warning that momentum might slip further.

The improvement “is by no means an all-clear concerning the development of the German economy,” ZEW President Achim Wambach said in a statement. “However, the rather strong fears that financial experts had in the previous month regarding a further intensification of the trade conflict between the U.S. and China did not come true.”

Wambach said the ECB’s stimulus move also eased investor concerns.

The deteriorating growth prospects and the sense that the ECB is stretching itself to its limits have fueled calls for more fiscal stimulus.

Still, Chancellor Angela Merkel has rejected such calls, saying that the problem isn’t a shortage of money for investment and there are sufficient projects in the pipeline. Finance Minister Olaf Scholz said last week that Germany would stick to a balanced budget but was ready to act in moments of a crisis.

ECB policy makers decided last week to cut interest rates and resume bond purchases to give euro-area growth and inflation more impetus, though quantitative easing was opposed by several officials including Bundesbank President Jens Weidmann. After that meeting, President Mario Draghi said it is “it’s high time for the fiscal policy to take charge.”

To contact the reporter on this story: Yuko Takeo in Tokyo at ytakeo2@bloomberg.net

To contact the editor responsible for this story: Paul Gordon at pgordon6@bloomberg.net

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