German Investor Confidence Jumps to 21-Year High on Vaccines

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Investor confidence in Germany’s economic recovery jumped to the highest level in more than 21 years after the country’s vaccine rollout gained speed.

The ZEW institute’s gauge of expectations rose to 84.4 in May from 70.7 the previous month. A measure of current conditions improved, as did prospects for the euro zone.

German Investor Confidence Jumps to 21-Year High on Vaccines

Germany, the region’s largest economy, has significantly boosted its pace of inoculations to fight off the coronavirus pandemic in recent weeks, with almost a third of the population now having received a shot. The improving health prospects are raising hopes that the nation will eventually be able to exit the severe virus restrictions that have been in place since November.

“The slowing down of the third Covid-19 wave has made financial market experts even more optimistic,” ZEW President Achim Wambach said in a statement. “The experts expect a significant economic upswing in the coming six months.”

The report feeds into mounting bets by investors on rising inflation as Europe’s economy recovers. German bonds declined Tuesday, with the 30-year yield climbing 5 basis points to 0.41%, the highest level since 2019. The German 10-year breakeven rate, a measure of the bond market’s inflation expectations, rose to the highest level since 2014.

European Central Bank Executive Board member Isabel Schnabel said in an interview with German media that the country’s inflation rate could climb above 3% in the short term, but that it won’t last and policy makers will look beyond such volatility.

A market-based measure of euro-area price growth is at the highest in two and half years.

The euro area is starting to recover after a slow start to vaccinations led to extended lockdowns that tipped the bloc into a double-dip recession in the first quarter. The ECB was forced to increase the pace of its bond purchases to prevent rising borrowing costs spilling over from the faster U.S. rebound and damping the outlook further.

Germany has imposed nightly curfews as well as wide-ranging store closures across virus hotspots. Manufacturing has remained resilient -- data last week showed that both industrial demand and output rose in March -- though companies are now being hampered by supply shortages and delivery delays.

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