German investor confidence strengthens, ZEW survey says

German economic confidence has picked surprisingly strongly this month, with the ZEW investor sentiment survey recording its highest reading in four months.

ZEW's October index of investor expectations climbed to 6.2 from 0.5 a month ago and beat the consensus estimate of 4.0.

As well as the headline index, the ZEW survey on the current economic situation edged up to 59.5 from 55.1 a month ago and above the consensus 55.5.

European economist Jennifer McKeown at Capital Economics said that the ESI moving to its highest level in four months suggested that fears about the effects of Brexit were easing, which was offsetting concerns about the wider implications of Deutsche Bank’s troubles.

"However, on the basis of its past loose relationship with annual GDP growth, the ESI points to a slowdown from Q3’s rate of 1.7% to about 1.0%. It therefore supports the picture of a slowing economy painted by the Composite PMI rather than the more upbeat tone of the Ifo survey over recent months. Admittedly, though, the ZEW is not a reliable indicator and business surveys over the next couple of weeks will hopefully give a clearer and more consistent steer on how the economy is performing."

Claus Vistesen at Pantheon Macroeconomics noted that investor sentiment has been resilient in recent months despite the clouds of political uncertainty.

"Investors’ inflation expectations increased as did interest rate expectations, consistent with mounting evidence that deflation is yesterday’s story for financial markets. Across industries, equity analysts’ expectations rose most in manufacturing, while sentiment remained depressed in financials," he said.