German investor sentiment plunged to its weakest level in 15 years in June, a leading survey showed today, fuelling concerns about the outlook for Europe's largest economy and sending the euro lower.
The ZEW economic research institute's gauge of expectations for Germany, based on a poll of 264 analysts and investors, fell to -52.4 from -41.4 in May - its lowest since December 1992.
A Reuters poll of 45 economists last week had pointed to a more modest dip in the index to -42.0. The euro erased gains versus the dollar while Bund futures moved higher after the release of the figures.
"The data is really quite shocking. The mood among the analysts has dropped close to freezing point," said DekaBank economist Andreas Scheuerle.
"At the same time, the numbers should be read with some caution," he added. "The ZEW barometer is an indicator of the market climate, not necessarily of economic developments. The interest rate signal from the ECB was a shock for the markets."
The European Central Bank said earlier this month it may raise interest rates as soon as July against a backdrop of rising inflation pressures.
Asked if the prospect of a rate rise had dampened sentiment, ZEW economist Michael Schroeder said: "It's one factor."
"It cannot be ruled out that growth could be negative for one quarter. That does not mean that we are facing a recession," Schroeder added. "The majority think there will be stagnation from now until the end of the year."
Economists widely expect the economy to slow after growing by 1.5 per cent on the quarter in the first three months of this year, its strongest expansion since 1996, as investment surged and private consumption picked up.
A separate ZEW gauge of current conditions in Germany dipped to 37.6 from 38.6 in May, in line with expectations.
A gauge of expectations for the euro area fell to -52.7 from -43.6 the previous month. The ZEW survey was conducted between June 2nd and June 16th, the Mannheim-based think tank said.