German ZEW investor sentiment rises despite Brexit, COVID-19 headwinds

"The ZEW Indicator has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy," said ZEW President Achim Wambach. "Stalled Brexit talks and rising COVID-19 cases could not dampen the positive mood." A separate gauge of current conditions rose to -66.2 from -81.3 points the previous month.

Investor sentiment in Germany rose unexpectedly in September, the ZEW economic research institute said on Tuesday, signalling confidence in a recovery from the coronavirus crisis despite headwinds from stalled Brexit talks and rising new infections.

The survey of investors' economic sentiment rose to 77.4 from 71.5 points the previous month, confounding a Reuters poll forecast for a fall to 69.8. "The ZEW Indicator has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy," said ZEW President Achim Wambach.

"Stalled Brexit talks and rising COVID-19 cases could not dampen the positive mood." A separate gauge of current conditions rose to -66.2 from -81.3 points the previous month. That compared with a consensus forecast of -72.0 points.

The German economy has been rebounding since May when lockdowns to slow the spread of the coronavirus were lifted. But activity remains below pre-crisis levels and economists expect a slow recovery. An economic rescue programme approved by Chancellor Angela Merkel's conservatives and their Social Democrat (SPD) coalition partners is supporting the recovery.

It includes lower value-added tax rates to encourage private spending and subsidies for companies to keep employees on the payroll and avoid mass layoffs. ZEW's Wambach said there would be problems ahead for some sectors, especially banks.

"The still-negative outlook for the banking sector reveals fears of a rising number of loan defaults in the coming six months," he said. (Reporting Joseph Nasr; editing by Thomas Seythal and Catherine Evans)

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