German Investor Sentiment Probably Increased in April
German investor confidence probably turned positive for the first time in almost two years in April after stock markets rallied on government and central bank efforts to revive economic growth, a survey of economists shows.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to 2 from minus 3.5 in March, according to the median of 35 forecasts in a Bloomberg News survey. That would be the first positive reading since July 2007. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.
European stocks last week posted their sixth consecutive weekly advance as speculation grew that the worst of the financial crisis has passed. German Chancellor Angela Merkel’s coalition will spend about 80 billion euros ($104 billion) to stem the country’s worst recession in over six decades and the European Central Bank has signaled it will cut interest rates again to a new record.
“There really is a feeling that we’ll see a bottoming out,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt, who expects the ZEW index to rise to 11. “The stock market recovery will always boost investor confidence and the stimulus packages combined with cheaper commodity prices are pointing to a recovery in the second half of the year.”
Still, ZEW’s gauge of current conditions will fall to minus 90 from minus 89.4, the survey of economists shows.
Deep Recession
The German economy, Europe’s largest, will shrink 5.3 percent this year, according to the Organization for Economic Cooperation and Development. Business confidence fell to the lowest level in more than 26 years in March and industrial production dropped for a sixth month in February.
Adding to signs of a deepening economic slump, German producer prices declined 0.5 percent from a year earlier in March, the Federal Statistics Office in Wiesbaden said today. That’s the biggest drop since September 2002.
The International Monetary Fund has also tried to temper optimism about the global outlook, saying on April 16 that the economy is in the grip of a “severe recession” and a recovery will probably be weak no fax instant cash advance. The IMF publishes revised forecasts tomorrow.
‘Signs of Progress’
Germany’s benchmark DAX index has nevertheless gained 12.3 percent in the past month amid optimism that some $5 trillion added to the world economy by governments will ensure the worst of the recession is confined to 2009.
U.S. Federal Reserve Chairman Ben S. Bernanke said April 14 that the “sharp decline” is slowing and President Barack Obama, while warning of “pitfalls” ahead, said government action is starting to “generate signs of economic progress.”
Bank of America Corp. yesterday reported first-quarter profit that beat the most optimistic analysts’ estimates. The largest U.S. bank by assets follows JP. Morgan Chase & Co, Goldman Sachs Group Inc and Citigroup Inc in posting first- quarter earnings that topped analyst forecasts.
In Germany, Hannover Re, Germany’s second-biggest reinsurer, said April 17 it had a “good start” to the year.
“We are seeing very slow improvements,” said Aline Schuiling, an economist at Fortis Bank in Amsterdam. “If anything, it’s the end of the freefall for the German economy.”
A 67 percent decline in the price of crude oil since July pushed German inflation to the lowest level in almost 10 years in March, with prices rising just 0.4 percent from a year earlier.
Waning inflation pressures across the 16-nation euro region have prompted the ECB to cut 3 percentage points from its key rate since early October, bringing the benchmark to a record low of 1.25 percent.
ECB President Jean-Claude Trichet has indicated the central bank will lower the rate further next month and announce additional non-standard measures to counter the economic slump. Council member Christian Noyer told RTL radio today that the bank has “room” for a reduction in borrowing costs, though it’s “not very large.”
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