German Investor Confidence Declines for Third Month (Update1)

German Investor Confidence Declines for Third Month (Update1)
2009-12-15 10:10:16.852 GMT

(Adds euro in sixth paragraph.)
By Gabi Thesing
Dec. 15 (Bloomberg) -- German investor confidence declined for a third month in December after the economic recovery in Europe’s largest economy weakened and concern over Greece’s widening deficit roiled markets.
The ZEW Center for European Economic Research index of investor and analyst expectations, which aims to predict developments six months ahead, slipped to 50.4 from 51.1 in November. Economists expected a drop to 50, according to the median of 33 forecasts in a Bloomberg News survey.
European stocks dropped last week after Fitch Ratings downgraded Greece’s debt, renewing concern about the fiscal health of some euro-region members. In Germany, the economy probably won’t be able to maintain the 0.7 percent growth rate recorded in the third quarter, when expansion was boosted by government stimulus, the Bundesbank said yesterday.
"There was a serious expectations boost earlier in the year and that is running out of steam a bit," said Nick Matthews, an economist at Royal Bank of Scotland Group Plc in London. "The recovery is still fairly fragile and last week’s events surrounding Greece also weakened investors’ confidence."
The ZEW conducted the survey between Nov. 30 and Dec. 14.
The institute’s gauge of the current economic situation rose to minus 60.6 from minus 65.6 in November. Economists forecast that it would increase to minus 60.1, according to the survey.

‘Stable’

The euro extended its decline after the report, dropping to as low as $1.4525. It was at $1.4537 as of 11:09 a.m. in Frankfurt, from $1.4656 yesterday.
Separately, the European Central Bank will today call for bids in its last tender of 12-month loans. It has tightened the terms of the loans by indexing the interest rate to its benchmark rather than allotting funds at a fixed 1 percent.
The ECB, which has cut its key rate to a record low of 1 percent and flooded markets with cheap cash to stem the crisis, is scaling back its emergency measures "as conditions are now stable enough" to begin the removal, President Jean-Claude Trichet said on Dec. 10. It will announce the results of the tender tomorrow.
Recent data from Germany, which emerged from the worst recession since World War II in the second quarter, have painted a mixed economic picture. While factory orders and industrial production fell in October, exports rose more than economists forecast. Manufacturing expanded for a second month in November.

Record Profit

Deutsche Bank AG, Germany’s biggest bank, said yesterday that pretax profit may reach a record 10 billion euros ($14.7
billion) in 2011 as it boosts earnings at the corporate and investment bank and expands in Asia. BASF SE chief executive officer Juergen Hambrecht said on Dec. 5 that the company will post better-than-expected fourth-quarter results. Sales in October and November were "pleasing," Hambrecht said.
The Bundesbank this month raised its outlook for the economy, forecasting growth of 1.6 percent in 2010 and 1.2 percent in 2011. Still, it said yesterday that the "strength and nature" of the financial crisis has damaged Germany’s growth potential.
A strengthening euro may hurt export competitiveness and curb growth. The euro has gained about 17 percent against the dollar since mid-February and reached a 15 month high last month.
"A strong euro is certainly a headwind for Germany and may put a brake on the recovery," said Laurent Bilke, an economist at Nomura International in London. "However, the global rebound will boost demand for German goods, so it’s not going to derail it."