LGT Navigator

Investor outlook in Germany plummets

Editorial note: Due to a holiday, the next edition of the LGT Navigator will be published on Monday, May 22.

An investor confidence survey in Germany dropped for the third month in a row, signalling Europe’s largest economy may be headed for recession. The negative outlook for Germany was corroborated by slow economic growth data from the euro area on Tuesday. Markets were also under pressure Tuesday due to concerns about a potential US default in the coming days, should lawmakers in Washington not come to an agreement about the nation’s maximum debt level.

Shane Strowmatt, LGT
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Germany’s ZEW Indicator of Economic Sentiment came in at -10.7 points in May, 14.8 points lower than the previous month. That is the third monthly drop in a row and first negative reading in 2023. ZEW President Professor Achim Wambach said the results signal the German economy could slip into a recession and noted the poor results were partially due to market participants’ expectations that the European Central Bank (ECB) will continue to hike rates. The ECB increased interest rates by 25 basis points earlier this month, a slower pace than the three previous hikes of 50 basis points and officials have since signalled more hikes are likely to come. Also on Tuesday, the EU statistics agency Eurostat confirmed the euro area’s meagre first-quarter economic growth of 0.1% when compared with the last quarter of 2022.

In New York, markets came under pressure despite solid retail sales data released Tuesday. Retail sales increased in April by 0.4% when compared with the previous month. While some economic data has been showing a slowing of the US economy, retail sales suggests consumers are still willing to spend despite high inflation and other headwinds. Nevertheless, the Dow Jones Industrial fell more than 1% to close Tuesday at 33,012.14 points. The S&P 500 dropped 0.64% to finish the day at 4,109.90 points. The tech-heavy Nasdaq-100 managed to stay in positive territory, finishing the session up 0.09% at 13,426.01 points.

In Asia, trading was mixed today. Japan’s Nikkei 225 was leading gains, trading up 0.9%, after data released Wednesday showed Japan's GDP grew 0.4% in the first quarter of the year, when compared with the previous quarter. In mainland China, the Shanghai Composite fell 0.5%, and the Shenzhen Component was 0.2% lower. Hong Kong’s Hang Seng Index was down 0.9%. South Korea’s Kospi made gains of 0.6%.

Corporate news in focus: Earnings figures from Siemens, Commerzbank, Munich Re. Annual general meetings at Deutsche Bank, Applied Materials, Cisco.

Economic data in focus: Eurozone Consumer Price Index (11:00 CET), Bank of England Governor Andrew Bailey delivers keynote speech at British Chambers of Commerce Annual Conference (11:50), US housing starts and building permits (14:30), EIA weekly petroleum status report (16:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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