German Investor Optimism Rises to 2016 High as China Risk Abates

  • ZEW expectations index climbs to 11.2 in April from 4.3
  • Survey cites positive news from China though concerns remain

German investor confidence climbed for a second month, rising to the highest level this year, as concerns over China’s economy eased and the European Central Bank ramped up euro-area stimulus.

The ZEW Center for European Economic Research said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months ahead, advanced to 11.2 in April from 4.3 in the previous month. Economists in a Bloomberg survey predicted an increase to 8.0.

“We believe it’s the positive economic news from China that is the main driver,” Jesper Riedler, one of the survey’s authors, told reporters in Mannheim. “It was this fear of an unstable Chinese economy that has been a drag.”

After China’s attempts to rebalance its economy unsettled global financial markets last year, recent data has shown credit supply and property sales supporting growth. At the same time, ECB policy makers have pumped liquidity into the euro area via bond purchases and record-low interest rates as they try to revive inflation in the currency bloc and sustain an economic recovery.

A measure of expectations for the euro area jumped to 21.5 in April from 10.6 in March, ZEW said. A gauge of current conditions in Germany dropped to 47.7 from 50.7.

Stock Gains

Germany’s DAX Index has climbed more than 8 percent since March 10, when the ECB cut its official deposit rate to minus 0.4 percent, expanded quantitative easing by a third to 80 billion euros ($91 billion) a month, and announced free long-term loans for euro-area banks.

The ECB will announce its latest rate decision at 1:45 p.m. in Frankfurt on Thursday, and President Mario Draghi will hold a press conference 45 minutes later. A Bloomberg survey of economists showed policy makers will probably have to act again after the summer, though no fresh stimulus measures are forecast for this week.

Even so, Germany’s Bundesbank said in a monthly report on Monday that it sees signs of slowing momentum in the nation’s economy this quarter, after a strong pace of expansion in the first three months of the year. The ZEW survey showed that while concerns over the international outlook have faded, risks remain, including the U.K.’s June 23 referendum on its European Union membership.

“The continued poor growth in China and other important emerging markets continues to be a burden for the German export industry,” said Sascha Steffen, ZEW’s research head for international finance and financial management. “Furthermore, concern about Great Britain’s possible exit from the EU seems to be having a negative impact.”

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