German gloom pressures shares, central banks eyed

Mon Aug 27, 2012 6:05am EDT
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By Richard Hubbard

LONDON (Reuters) - A gloomy assessment of the business climate in Germany kept European shares under pressure on Monday, but moves were capped ahead of a meeting of central bankers at the end of the week which could point toward fresh stimulus measures.

The latest Ifo index, which is compiled from a survey of some 7,000 German firms on economic conditions, fell in August to its lowest level since March 2010 as the euro zone crisis and a slowdown in China took their toll.

"It looks as if the German economy will, at best, be treading water in the coming months," Carsten Brzeski, senior economist at ING.

The euro zone's blue chip Euro STOXX 50 index .STOXX50E was down about 0.1 percent after the Ifo data at 2,431.10 points, although volumes were thin as the British market, Europe's largest, was shut for a public holiday.

The main German stock index .GDAXI was little changed, recovering some of its earlier losses, as some of the Ifo institute's findings were not as bad as many feared.

The euro also rose to $1.2530 after the Ifo survey was released, up 0.15 percent on the day, but was holding below a peak of $1.2590 set last Thursday.

Analysts said the weaker outlook in Europe's biggest economy could also support political efforts to find a solution to the region's fiscal crisis, in part by supporting arguments made by German Chancellor Angela Merkel and European Central Bank President Mario Draghi.

"The declining growth rate in Germany shows that the country is not immune from the general slowdown in Europe and outside Europe," said BNP Paribas economist Dominique Barbet.   Continued...

A man passes an electronic board displaying market indices from around the world outside a brokerage in Tokyo August 23, 2012. REUTERS/Yuriko Nakao