LGT Navigator

German business sentiment weakens again

German business morale fell again in September, the fifth month of deteriorating sentiment data out of Europe’s largest economy. It’s the latest signal that the euro area is going through a difficult third quarter with the economy weakening while inflation remains high. Markets reacted negatively with yields on German ten-year bonds hitting their highest levels since 2011.

Shane Strowmatt, LGT
Tempo di lettura
5 minuto
German flag with clouds
© Shutterstock

Germany’s ifo Business Climate Index came in at 85.7 points in September, down slightly from August’s 85.8 points. Business expectations, however, brightened up slightly to 82.9 points from 82.7 points last month, meaning pessimism is slowly becoming less bad. The European Commission now expects the euro area economy to grow by just 0.8% this year, largely dragged down by Germany, which was already in a recession in late 2022 and early 2023 and has since been struggling to create economic growth.

Following the release of the ifo data, German ten-year bond yields hit the highest level since 2011, trading at around 2.8% on Monday. Germany’s DAX dropped 1%. European markets overall fell somewhat less with the Stoxx Europe 600 losing 0.6% on Monday. Consumer price data from Germany and other European countries due later this week will give investors an indication about the European Central Bank’s (ECB) next move after the ECB raised rates for a tenth consecutive time earlier this month.

In New York, stock indices ignored the weak economic data coming out of Europe and managed to stabilize at the start of the week. The Dow Jones Industrial gained 0.1% and the S&P 500 put on 0.4%. The Nasdaq-100 ended the session 0.5% higher. The stabilization comes despite more uncertainty was on the horizon. A possible shutdown of the US government due to budget constraints could come as early as Sunday, depending on budget legislation that is under consideration. Treasuries came under pressure with yields on ten-year government debt rising to 4.552%, which was last reached in 2007.

In the Asia-Pacific region, stocks were struggling again on Tuesday with no major economic data or central bank decisions to lift market sentiment. In Tokyo, the Nikkei 225 was trading down 0.9% and in South Korea, the Kospi lost 1.2%. In Australia, the S&P/ASX 200 is down 0.5%. Chinese markets were also under pressure with Hong Kong's Hang Seng Index dropping 1%, while the Shanghai Composite fell 0.3%.

Corporate news in focus: Costco Q4 figures.

Economic data in focus: US building permits (14:00 CET), Conference Board Consumer Confidence Index (16:00), US new residential sales (16:00).


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

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