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EMU: German ZEW jumps back to positive territory

Wed, Apr 22 2009, 07:42 GMT
by KBC Market Research Desk

KBC Bank


In April, the German ZEW index showed an improvement in economic sentiment from -3.5 to 13.0, while a more modest rise (to 2.0) was expected. This is the first positive outcome since July 2007 and the highest level since June 2007. The current situation however deteriorated from -89.4 to -91.6. It will be interesting to see whether also other confidence indictors will show an improvement in April as the ZEW lost recently much of its correlation with other sentiment indicators.


Other: Riksbank cuts rates to 0.50%

In the UK, CPI inflation rose by 0.2% M/M in March, exactly matching the consensus estimate. Also the yearly figure came out in line with expectations dropping from 3.2% Y/Y to 2.9% Y/Y. Core CPI, excluding food and energy, rose from 1.6% Y/Y to 1.7% Y/Y, while a marginal decline was expected. Looking at the details, price declines were concentrated in food, fuel, housing and leisure goods, while prices of clothes, household goods and a number of other categories were still rising. In the coming months, the yearly figure is forecasted to decline further.

The Executive Board of the Swedish Riksbank decided to cut rates by 50 basis points to 0.50%. The Swedish central bank said the lower repo rate was needed to dampen the fall in production and employment and to attain the inflation target of 2%. There remains some probability of further cuts in the future, but the bank added that such low levels could have negative effects on the functioning of the financial markets. Also remarkable is the fact that the Riskbank said the repo rate is expected to remain at the low level until the beginning of 2011. In the Monetary Policy Update, the Bank said that there is a possibility to supplement the regular monetary policy with purchases of government bonds and possibly also mortgage bonds if economic activity deteriorates further.

Published on  Wed, Apr 22 2009, 07:45 GMT


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This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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