ZEW Investor Confidence Set To Ease After August Spike
Investors are expected to be less bullish about Germany and the Eurozone this month.

- Headline German sentiment seen at 69.8 (prev 71.5)

- Current conditions reading forecast at -72.0 (prev -81.3)

- Growth, Covid-19 concerns to weigh on optimism

- Data due Tuesday at 09.00 GMT

 

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

 

14 September 2020 / 08.50 GMT

 

FRANKFURT – Germany’s leading gauge of investor sentiment is expected to fall from its highest level in 16 years on Tuesday due to concerns about rising Covid-19 cases and fears that Europe’s recovery may be weaker than forecast.

 

An economists’ poll says the ZEW’s forward-looking economic sentiment index for Germany will ease to 69.8 this month from the 71.5 reading in August, the best showing since January 2004. The current conditions index for Europe’s biggest economy is forecast higher at -72.0 versus last month’s -81.3 result.

 

The ZEW’s economics sentiment index for the euro area rose to 64.0 in August, but it is also projected to decline this month, according to Daniela Ordonez, chief French economist at Oxford Economics. “Following a string of monthly improvements, we expect the ZEW index to fall slightly amid the renewed rise in Covid-19 cases across the eurozone, which will likely have negative spill-overs on other areas of the economy, be it through re-imposition of some containment measures or increased consumer caution, another sign that the economic recovery is losing steam.”

 

Last week, France said it set a record for new coronavirus cases in a single day, and both Italy and Germany have reported upticks in the number of daily infections.

 

Sentix's current situation indicator for the Eurozone (blue) remains in negative territory.

Eurozone rebound slowing?

Danske Bank said Tuesday’s ZEW report will set the tone for the September PMIs due next week. “High frequency data suggests that the euro recovery has continued in September but at a slower pace. ZEW expectations have already shown a stellar rebound in recent months, so a small setback here would not be surprising. More interesting will be whether the current situation assessment continues to head up.”

 

Investor survey results from Sentix released last week displayed another gain in the overall index for Germany, but the rise came solely on improvements in optimism about the present, with the expectations component slipping this month.

 

“The way out of the recession is long,” Sentix said, noting that investors expect it will take more than a year for the German economy to bounce back to pre-pandemic levels.

 

And measures for the current environment in Germany and the Eurozone remain in negative territory for both the Sentix and ZEW polls, which indicates recessionary tendencies.