Germany ZEW Sentiment Strengthens to 34.2 as Current Conditions Improve

Germany’s August ZEW survey showed a clear improvement in investor sentiment, with the Economic Sentiment index rising to 34.2 from 26.3 and beating expectations of 30.1. Current conditions also improved materially, though they remained deeply negative at -61.1. The better tone was supported by solid corporate results, strong exports and federal infrastructure spending, with gains spread across vehicles, chemicals/pharma, machinery and metals. Eurozone sentiment rose as well, reinforcing the view that confidence in Europe is recovering faster than actual economic conditions. For markets, the report is modestly supportive for the euro and cyclical German assets, but the still-weak current situation and Rhine water risk temper the upside.