Expectations Current
Index Conditions
————————————————————————
April: +53.0 -39.2
MNI survey median: +45.8 -47.0
MNI survey range: +42.0 to +50.0 -50.0 to -43.9

MANNHEIM, Germany (MNI) – Investors’ and market participants’
six-month outlook for Germany recovered unexpectedly sharply in April
after six months of decline, the Center for European Economic Research
(ZEW) reported Tuesday.

Rising optimism about the next half-year left the indicator 8.5
points above last month’s reading of +44.5 and well above even the
highest forecast in an MNI survey of analysts. The April figure is above
the index’s long-term average of 27.3.

Financial market experts expect “German business activity to
continue to recover from the economic crisis within the next six months.
The financial market experts’ positive expectations seem to have been
decisively reinforced by the recent increase in exports and stable
incoming orders,” ZEW said.

“Currently, impulses from exports invigorate German business
activity. Indeed these impulses are necessary to stabilize the upward
trend of the economy,” ZEW President Wolfgang Franz said.

The ZEW current economic situation index rose 12.7 points to -39.2,
the eleventh consecutive month of improvement. That was also above the
highest analyst forecast.

The sharp rise in market participants’ optimism this month comes
despite the high degree of uncertainty and nervousness in markets
regarding Greece’s fiscal health. During trading Monday morning, the
spreads between Greek and German 10-year government bonds hit an
11.5-year high, showing that investors remain skeptical regarding the
implementation and effectiveness of the rescue package agreed by
Eurozone finance ministers last week.

Germany’s Bundesbank indicated Monday that the country’s GDP likely
dropped in 1Q, with construction, industrial production, and private
consumption weighing on growth.

Nevertheless, the bank reiterated that the country’s growth trend
is still positive and that an anticipated turnaround in the second
quarter would exhibit more than catch-up effects.

The ZEW’s expectations indicator for the Eurozone as a whole rose
8.1 points to 46.0, while the current conditions indicator for the
Eurozone increased 8.9 points to -52.4.

This month’s ZEW release comes just three days before Germany’s Ifo
Institute is scheduled to publish its sentiment indicator for April. In
recent months, the two indexes have diverged. While ZEW has finally
recovered after a six-month losing streak, Ifo’s lead indicator has
risen in five out of the last six months. It is expected to gain 0.6
point to 98.7, according to an MNI survey of analysts.

ZEW said 294 analysts and institutional investors participated in
its April survey. A ZEW expert noted that among participants there is
little change in inflation expectations over the next six months in the
Eurozone and Germany.

In addition, a majority of participants still think short-term
interest rates will remain unchanged over the next six months in the
Eurozone, even though the number expecting an increase rose this month.

–Frankfurt bureau tel.: +49 69 720 142. Email: frankfurt@marketnews.com

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