The WSJ reports,"the euro slid and German shares deepened
their recent slump Tuesday as fears intensified that a downturn in
Germany's economy could threaten the euro zone's economic recovery.
The
moves came after an unexpected slump in German economic sentiment
became the latest sign that the economic standoff with Russia over the
conflict in Ukraine is hurting Europe's largest economy.
Germany's
ZEW index of economic expectations, a survey of analysts and investors,
fell to 8.6 in August from 27.1 in July, its lowest level since
December 2012. And there may be more bad news this week as data on
Thursday are expected to show a contraction in Europe's largest economy.
Germany's DAX stock index closed 1.2% lower, compared with a fall of just 0.2% in the pan-European Stoxx Europe 600 index.
The euro fell 0.3% against the dollar to $1.3336, close to the nine-month low it touched last week.
Germany's main stock index has fallen out of favor during the Ukraine crisis, as investors worry about the country's close trade links with Russia.
In
bond markets, yields on safe-harbor German 10-year debt edged lower to
1.06%, not far above the all-time low of 1.02% also hit last week. Lower
yields mean higher prices.
"The
question to what extent the European economy will be affected by these
tensions has increasingly become an issue amongst investors," said
Lutz Karpowitz,
a currency strategist at Commerzbank.
Growth
data for the euro zone are due on Thursday. Economists expect Germany
to lag behind the paltry 0.1% quarter-on-quarter expansion they predict
for the currency bloc as a whole, with a 0.1% loss of output.
"The ZEW index is good at predicting turning points of the economic
trajectory and the uninterrupted decline since the end of last year has
well flagged the loss of momentum of the economy in the second quarter,"
said
Christian Schulz,
senior economist at Berenberg".
