German investor morale improves on hopes for inflation drop – ZEW
German investor sentiment improved more than expected in November on hopes that inflation will fall soon, even though the economic outlook for Germany remains gloomy overall.
The ZEW economic research institute said on Tuesday its economic sentiment index rose for the second month in a row in November, to -36.7 from -59.2 the month before. A Reuters poll had pointed to a November reading of -50.0.
A negative ZEW reading indicates more analysts have a pessimistic view of sentiment six months ahead than an optimistic one.
“This is likely to be related above all to the hope that inflation rates will fall soon,” said ZEW President Achim Wambach. “In this case, policymakers would not have to hit the brakes on monetary policy as hard and/or for as long as feared.
“However, the economic outlook for the German economy is still clearly negative,” he added.
The European Central Bank has increased rates at its fastest pace ever, hiking them by a combined 200 basis points to 1.5% in just three months, to tame record high euro zone inflation. Despite the rapid pace, markets still expect the bank to hike rates further.
France’s central bank chief said on Tuesday that signs of peaking headline and core inflation in the United States were “good news” for everyone, given that the world’s top economy had been at the forefront of the global inflation cycle.
The current conditions index also saw a stronger-than-expected increase in November, rising to -64.5 from -72.2 the previous month. Analysts polled by Reuters had expected a reading of -68.4.
A number of factors, including a planned cap on energy prices and full gas storage levels, contributed to the improved mood in November, according to analysts. They stressed, though, it did not indicate that a turnaround was on the way.
The rise in expectations shows investors seem to have become accustomed to the global crisis environment, “but pessimism continues to reign,” said Hauck Aufhaeuser Lampe private bank’s Alexander Krueger. “With no solution to the energy crisis in sight, uncertainty will remain high for the time being.”
Source: Reuters (Reporting by Rene Wagner, Reinhard Becker, Miranda Murray, Editing by Rachel More and Tomasz Janowski)