Economic trends reflected little change as DAX commenced the day, with market attention focused on the latest results of the ZEW survey and fresh data on US inflation rates.
In the global economic landscape, the focus has shifted towards the ZEW survey results in Germany and US inflation data. As of August 2025, the current economic outlook for Germany is mixed and somewhat fragile.
The ZEW Economic Sentiment Index, which measures investor confidence and expectations for the medium-term economic outlook, has declined significantly from a high of 52.7 in July to 34.7 in August. This indicates that investor confidence and expectations for the medium-term economic outlook have dropped sharply, partly due to disappointment in the recent US-EU trade deal and sector-specific weakness in chemical and pharmaceutical industries.
Conversely, the ifo Business Climate Index shows a slight increase to 88.6 in July, the highest level since the previous summer, reflecting cautious business optimism despite ongoing challenges. However, the current conditions index from ZEW deteriorated to -68.6 in August from -59.5 previously, signaling ongoing negative perceptions of the immediate economic environment.
These mixed signals come as Germany’s GDP shrank slightly by -0.1% in Q2 2025, reflecting effects from US-EU trade tensions and tariff policies impacting industrial production. Meanwhile, the German government and corporations are pledging significant investment (over €631 billion by 2028) to stimulate growth, but the impact remains to be seen.
This divergence in economic sentiment—businesses remain moderately optimistic while investor confidence drops sharply—creates uncertainty for the European Central Bank (ECB) and indirectly affects Federal Reserve (Fed) expectations. The Fed closely watches major global economies like Germany due to their impact on global trade and inflation dynamics.
Given Germany’s fragile outlook and slowing growth signs, combined with recent ECB rate cuts aimed at supporting the Eurozone, the Fed may interpret this as a reduced risk of overheating in global markets, potentially easing the pressure to raise US interest rates aggressively. However, persistent geopolitical tensions and trade disputes maintain upside risks for inflation and supply chain disruptions.
In the morning trading session, the price of a barrel of North Sea Brent crude rose by 17 cents, reaching 66.80 US dollars, while the trading of the US dollar and the European common currency remained unchanged. The price increase was the third consecutive rise in the price of oil. The Dax started trading on Tuesday with little change, with the German benchmark index calculated at 24,090 points, up 0.1 percent from the previous day's close.
The largest declines were seen in the shares of Hannover Rück, SAP, and Zalando. The top three shares on the price list are Sartorius, Continental, and Rheinmetall.
In summary, the German economic signals suggest a cautious global stance for central banks, with the Fed potentially adopting a more data-driven approach to interest rates rather than preemptive large increases. The focus of the market will remain on the ZEW survey results in Germany in the afternoon, with US inflation data also under the spotlight.
[1] ZEW Economic Sentiment Index: https://www.zew.de/en/research/indicators/german-economic-sentiment-index [2] ifo Business Climate Index: https://www.ifo.de/en/news/ifo-business-climate-index-august-2025 [3] German GDP: https://www.destatis.de/EN/Themes/National-Economy/National-Accounts/GDP/GDP-Quarterly-Accounts.html [4] German government investment: https://www.bundesregierung.de/breg-en/themen/wirtschaft-und-finanzen/investitionen-und-investitionen-2022-2025-1326724 [5] US-EU trade deal: https://www.reuters.com/business/us-eu-trade-deal-faces-new-hurdle-germany-2021-07-13/
- Despite a slight increase in the ifo Business Climate Index, indicating some business optimism, the ZEW Economic Sentiment Index has decreased significantly, showing a sharp drop in investor confidence towards the medium-term economic outlook in Germany.
- As the global focus lies on the ZEW survey results in Germany and US inflation data, the Fed closely watches major global economies like Germany due to their impact on global trade and inflation dynamics, particularly considering Germany's fragile economic outlook and the potential implications for central banks' interest rate decisions.
