Trade tensions hit German business confidence in June

Bloomberg

A slump in German business confidence deepened in June as trade tensions weighed on manufacturers.
US-led protectionist thr-eats have clouded the growth outlook in Europe’s largest economy for mon-ths, contributing to a manufacturing slump and bo- osting fears that domestic demand will be undermined. European Central Bank President Mario Draghi last week said he’ll inject fresh monetary stimulus for the euro zone unless the economy improves.
The drop in the Ifo index took the closely watched gauge to 97.4, its lowest level since late 2014. A gauge of expectations also worsened. The euro barely moved on the news and was up 0.2 percent at $1.1392 in Frankfurt.
“It could get worse, maybe not much worse but a little,” said Ifo President Clemens Fuest in a Bloomberg Television interview. “It’s justified to at least postpone any tightening of monetary policy. But I don’t think further easing will help very much. Mario Draghi has rightly pointed out that governments need to use other instruments.”
Draghi told European Union leaders last week that a more expansionary fiscal policy may be needed should the euro-zone economy deteriorate, and has long called for structural reforms to bolster resilience.
While Bundesbank President Jens Weidmann expects an improvement in Germany in the second half of the year as exports recover, the signs so far remain mixed.
A purchasing-managers survey showed solid growth in services, but manufacturing remained in contraction. Investor confidence in the nation worsened dramatically this month.
Bechtle AG recently lowered its sales expectation for this year, citing the economic slowdown. Geopolitical uncertainties and trade restrictions also forced chip-maker Siltronic AG to curb its outlook.
HSBC on Monday predicted the ECB will cut its deposit rate by 10 basis points in each of September and December, taking the rate to minus 0.6 percent, though it doesn’t expect an “imminent” resumption of quantitative easing.