ÜBER CONFIDENCE

German Investor confidence leaped forward yet we remain cautious on fundamentals there...

German investor confidence, as measured by the ZEW Center for European Economic Research to predict economic development six months ahead, soared to 31.3 in May from 13 in the previous month.  While forward-looking confidence has improved sequentially over the last seven months (see chart), ZEW's gauge of the current situation continues its plunge, falling to -92.8 from -91.6 in April.

In our last German post on 5/8 entitled "Exports: What Germans Do Best (..or Second Best)" we presented the country's mixed fundamental outlook. In the next two weeks we should have a better picture from April data; we continue to believe the country won't start to see positive GDP growth until early Q1 of next year, yet believe the export-led economy will have a larger upside than its Western European peers as global appetite for exports (specifically engineered industrial products) increases over the balance of this year and into 1H '10.

The German DAX is up 3% YTD and +34% since its March 9th low.  We'll get in on the long side of Germany again via the etf EWG at the right price. Stay tuned. Generally, we like to buy things when they are down, not up.

Positive confidence among domestic investors has turned decidedly bullish.

Matthew Hedrick

Analyst

ÜBER CONFIDENCE - germanychart