Further weakening expected in the ZEW

In German, after five straight months of increases, the ZEW investor economic sentiment indicator dropped in April as expected, to 53.3 from the peak of 54.8 in March. This drop was however not as big as the analysts had expected (49.6), while the index of current economic conditions surprised massively on the upside, surging to 70.2 from 55.1. 

There is a doubt, any of this resilience will be repeated in May, especially in light of the sell-off in bond markets and general rise in volatility. Consequently,Societe Generale expects sizeable declines, to 44.2 for the Economic Sentiment Indicator and to 62.3 for the assessment of present economic conditions. 

While the indicators still remain well above their long term averages, especially the assessment of current conditions, analysts still regard the adjustment as mainly technical, reflecting a toning down of growth expectations to more sustainable levels. In this regard, the assessment of current conditions may be more resilient while the expectations index may show greater volatility, added Societe Generale.