Investor confidence in Germany took a sharp turn for the worse in April, with ZEW Economic Sentiment Index plummeting from 51.6 to -14, its steepest decline since the onset of the Russia-Ukraine war in 2022.
The drop came in well below expectations of 10.6 and reflects mounting concerns over US trade policy, which ZEW President Achim Wambach described as marked by “erratic changes.” The Current Situation Index, however, showed a modest improvement, rising from -87.6 to -81.2, slightly better than forecast.
Eurozone also saw a significant deterioration in investor sentiment, with ZEW expectations gauge falling from 19.8 to -18.5, missing the anticipated 14.2 reading. Current Situation Index dropped by -5.7 points to -50.9.
According to ZEW, sectors most vulnerable to trade disruptions—such as autos, chemicals, and engineering—are now under renewed pressure, despite recent signs of stabilization. The growing unpredictability in global trade dynamics is weighing heavily on future expectations, dampening optimism across the bloc.
Despite the worsening sentiment, financial market participants do not foresee a renewed surge in inflation. This perception, ZEW notes, gives ECB some room to continue its easing cycle in an effort to support growth.
