A murkier outlook for German investor confidence (Fabian Sommer)

Berlin (AFP) – Confidence among German investors plunged in June, a closely-watched survey showed Tuesday, amid rising Middle East tensions, a US-China trade war and a rising possibility of a ‘no-deal’ EU exit for Britain.

Expectations for economic performance in Europe’s biggest economy for the coming months dropped 19 points compared to May to -21.1, according to the ZEW institute’s regular sounding of almost 200 analysts and financial players.

“The sharp drop in the ZEW indicator of economic sentiment coincides with an increased uncertainty regarding the future development of the global economy,” said ZEW president Achim Wambach.

“The intensification of the conflict between the USA and China, the increased risk of a military conflict in the Middle East and the higher probability of a no-deal Brexit are all casting a shade on the global economic outlook.”

Investors’ judgement of the economic outlook in the eurozone has also fallen off a cliff, dropping by 18.6 points from May to -20.2.

Having steadily climbed in the first few months of the year and nudging into positive territory in April, the figure for economic sentiment plummeted in export-orientated Germany amid uncertainty over possible new barriers to trade with major markets in the United States and Britain.

The sharp drop in confidence among investors follows US President Donald Trump ramping up his aggressive stance towards China in a bid to pressure Beijing to make a deal with Washington on trade.

On Monday, the US also raised the pressure on Iran by announcing the deployment of 1,000 additional troops to the Middle East, while insisting Tehran was behind last week’s attack on a tanker ship in the Gulf of Oman.

German investor confidence has also been rattled by Boris Johnson’s emergence as favourite to become leader of the UK’s Conservative party — potentially making him British Prime Minister by the end of the week.

Johnson has said he is open to leaving the EU on October 31 without a formal deal between London and Brussels, but would prefer to secure one by the deadline.

However, there were brighter spots in investor opinion in Tuesday’s survey as the indicator for Germany’s present economic situation dropped just 0.4, to 7.8 points.

The same measure for the eurozone rose compared to the previous month, climbing 3.3 to reach -3.7 points.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.