U.S. Markets

Euro zone investor morale falls further in July, German recession looms: Sentix

BERLIN (Reuters) - Investor morale in the euro zone deteriorated yet further in July, confounding expectations for a rise, with positive signals from the equity markets failing to soothe investors who do not expect an agreement in the trade conflict soon, a survey showed.

FILE PHOTO: European Union (EU) flags fly in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 3, 2015. REUTERS/Ralph Orlowski/File Photo

The Sentix research group said its investor sentiment index for the euro zone fell to -5.8 in July, down from -3.3 the month before, and well short of the 0.1 analysts had forecast. That was the lowest reading since November 2014.

A sub-index for Germany plunged to -4.8 from last month’s -0.7, its lowest in almost a decade.

“The high dependence on exports and the Chinese sales market is increasingly becoming a burden and the trade dispute hangs like a sword of Damocles over the one-time poster boy of the euro region,” Sentix director Patrick Hussy said of Germany.

“A recession looks unavoidable,” he said of Europe’s largest economy.

Hussy said an apparent de-escalation between the United States and China at the G20 summit in Japan had given rise to hope that the economy’s downward trend could be stopped but added that despite this investors “are once again giving the economy a thumbs-down”.

Hussy said the longer no agreement was found in the trade dispute, the more economic confidence suffered.

The United States and China agreed in late June to restart trade talks.

Sentix said 916 investors took part in its survey, which was conducted between July 4 and 6.

(This story has been refiled to add dropped word ‘not’ in lead before expect.)

Reporting by Thomas Escritt; Editing by Michelle Martin