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The sudden improvement in German business sentiment
The sudden improvement in German business sentiment
The German ZEW Economic Sentiment index unexpectedly improved in October, marking an increase from -61.9 to -59.2, whereas it had been expected to dip even deeper to -66.7. The index shows some signs of stabilisation, dropping to the same territory where it was at the peak of the global financial crisis.
Fourteen years ago, it took five months from the bottom of the index to the decisive upturn, and it would be premature to believe that the current attempt to "push back from the bottom" indicates a change in a trend toward improvement.
The Current Conditions Assessment Index continues its plunge, falling to its lowest level since August 2020. But this index is more likely to follow the market than to provide leading signals. In 2008 and 2020, for example, this sub-index bottomed two months after the markets bottomed.
At the same time, a sharp increase in the main index occurred in the same month when the markets and the euro were turning from decline to growth.
Interestingly, the German financial market is behaving as if it has already found a firm basis for growth: The DAX index has gained about 8% in the last four trading sessions and is back to the 13,000 mark, above which it was last seen in the first half of September.
The improvement in investor sentiment in Germany is due in no small part to gas storage filling faster than planned and a reversal to lower energy prices in recent weeks.
By the FxPro Analyst Team
ATFX Market Outlook 18th December 2024
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