German Investor Confidence Plummets on Coronavirus Fears

- Forward-looking indicator falls short of expectations

- Current situation component declines but beats forecast

- Recession concerns return

 

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

 

10 November 2020 / 10.40 GMT

 

FRANKFURT – Investor confidence in Germany has fallen to its lowest level since the April lockdown, with the current, less stringent restrictions to stop the spread of Covid-19 muting optimism among financial market mavens.

 

The ZEW’s forward-looking economic sentiment dropped to 39.0 this month to miss the 40.0 market forecast and the 56.1 reading in October. The forward-looking measure hit a 20-year high of 77.4 in September.

 

The German thinktank’s monthly survey also saw a decline in the current conditions reading, with the -64.3 result marginally outperforming the market estimate of -65.0 but below the -59.5 mark from October.

 

“Financial experts are concerned about the economic impact of the second wave of Covid-19 and what this will entail," ZEW President Achim Wambach said, noting that the decline in November indicates “a slowdown of economic recovery in Germany.

 

“There is also the additional worry that the German economy could head back into recession.”

 

The good news seems to be investors are ignoring the UK-EU trade standoff along with last week's US balloting and the conflict over the count, Wambach said. “Neither the Brexit negotiations nor the outcome of the US presidential election currently are having an impact on the economic expectations for Germany.”

 

Christopher Dembik, head of macro research at Saxobank, tweeted that this month’s ZEW report “gives us a first glimpse of the consequences of the second lockdown. And this is not good at all...”

 

Germany is expected to be in lockdown until the end of November.

 

Optimism despite the lockdown

Germany’s Council of Economic Advisors has lowered its forecast this year’s GDP contraction to 5.1% from its earlier estimate of 5.4% even though Europe’s largest economy enacted a second round of pandemic restrictions last week, according to the Munich daily Sueddeutsche Zeitung.

 

In a report scheduled for release Wednesday, the economists predict that the Germany will grow 3.7% next year, the newspaper said. It noted that the German experts expect the Eurozone economy to shrink 7% this year before rebounding nearly 5% in 2021.