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MoneyRecession fears in focus as German investor morale nosedives

16:45  13 august  2019
16:45  13 august  2019 Source:   reuters.com

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EUROZONE investor morale has crashed for the fourth month in a row - bringing confidence to the lowest ebb since February 2017. The downturn comes as a leading voice in German industry warns that jobs will be affected with President Donald Trump’s “worldwide protectionism spiral looming”.

German investor confidence unexpectedly rose in April, calming fears that the euro zone's sovereign debt crisis is weighing down the No. 1 economy in the monetary union, according to a report from Mannheim, Germany -based Centre for European Economic Research, or ZEW.

Recession fears in focus as German investor morale nosedives © Reuters/Michaela Rehle FILE PHOTO: German Economy Minister Altmaier and Soeder, Prime Minister of Bavaria, pose at R9200 mining excavator of 'Liebherr' during the official opening tour of 'Bauma' Trade Fair in Munich

The mood among German investors plummeted in August to its most pessimistic since the peak of the euro zone debt crisis, a leading survey showed on Tuesday, heightening concerns that Europe's biggest economy is heading for recession.

The sharp drop in the monthly ZEW survey, blamed on trade conflict and uncertainty over Brexit, sent German blue-chip shares <.GDAXI> to an intraday low as it prompted investors to switch into safer assets like government bonds.

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The mood among German investors took a deeper-than-expected slide in June, weighed down by A separate gauge measuring investors ' assessment of the German economy's current conditions "The latest escalation in the trade dispute with the United States and fears about policies by the new Italian

Investors are also fearing that the country’s financial crisis could hit the European markets as well. The events have led to Investors could tap this via the Invesco CurrencyShares Japanese Yen Trust (NYSEARCA:FXY), which appears a great way to play a future rise in the yen relative to the U.S. dollar.

Economic sentiment among investors fell to -44.1 from -24.5 in July, its lowest since Dec. 2011 and way short of expectations for a dip to -28.5.

"The ZEW survey gives a further clear warning signal of recession for the German economy," said Uwe Burkert, chief economist at LBBW Research.

Traditionally driven by strong sales of its products abroad, Germany's economy has this year increasingly relied on domestic demand to spur growth as exports, led by manufactured goods, have been hit by a broad-based downturn and tariff disputes that have acted as a brake on global trade.

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Data on Wednesday is expected to show German gross domestic product shrank marginally quarter on quarter between April and June, and economists are scaling back their already modest forecasts for the third quarter.

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The mood among German investors improved further in May to reach its highest since July 2015, a survey showed on Tuesday, in a further sign that political uncertainties which clouded the growth outlook for Europe's biggest economy are evaporating.

The euro gained on Monday as a stronger-than-forecast German business confidence survey allayed some fears about a recession and pulled the Those fears stoked a dumping of stocks and other growth-oriented assets and a rush into the yen, gold, U.S. and German government debt and other

ZEW President Achim Wambach said the survey pointed to a significant deterioration in the economic outlook, and its gauge measuring investors' assessment of current conditions fell to -13.5 from -1.1 in July. Analysts had predicted -7.0.

"The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth," Wambach said in a statement.

Recession fears in focus as German investor morale nosedives © Reuters/Vincent Kessler FILE PHOTO: A technician works at the Badische Stahlwerke (BSW) steel plant in Kehl

"This will most likely put a further strain on the development of German exports and industrial production."

While domestic developments have cushioned the economic blow thanks to record-high employment, inflation-busting wage rises and low borrowing costs, the heightened tensions between Washington and Beijing have raised fears in financial markets that the trade row will not end anytime soon.

Data on Friday showed that momentum in German exports slowed in the first half of the year and reversed in June, and figures earlier last week revealed a 1.5% fall in industrial output in May.

A Reuters poll of analysts predicts figures released on Wednesday will show a 0.1% second quarter economic contraction. The government expects the economy to grow just 0.5% this year.

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