Tuesday 11 June 2019 11:47 am

Eurozone investors gloomy as trade war continues to rage

Investors’ confidence in the Eurozone economy fell much more sharply than expected in May as they weighed up the escalation of the US-China trade dispute, a survey showed today.

Read more: Eurozone’s ‘modest’ growth reliant on service sector

Sentix, the firm that gathers the survey data, said the Eurozone economy was “once again on the threshold of recession”.

The overall index, which measures how confident investors are in the euro area’s economy, fell eight points in May to minus 3.3. Economists had expected a positive score of 2.9.

In Germany, the investor confidence index registered its lowest score since 2010. Sentix said: “A recession is therefore just around the corner”.

US President Donald Trump has spooked global stock markets since ramping up tariffs on $200bn worth of Chinese goods to 25 per cent at the start of May. The Euro Stoxx 50 index fell six per cent last month.

Yet the European Central Bank (ECB), which is responsible for the euro, does not see a recession coming. Earlier this month it predicted growth of 1.2 per cent for the Eurozone economy in 2019, although it said risks “remain tilted to the downside”.

Sentix said the manufacturing industry in Germany, the key sector in Europe’s biggest economy, is under threat from a slump in demand due to ongoing global trade disputes.

It added that concern about climate change had led to “questioning of the industry itself”.

Manfred Huebner, managing director of Sentix, said: “Although the cause of the problem is easy to identify, it is not necessarily easy to solve in view of the increasingly tough political fronts.”

Read more: ECB warns low growth could see asset prices fall

“The USA and China have long since been swinging upwards in an escalation spiral. At present it does not seem clear how an end to the conflict could be achieved in a face-saving manner for both sides,” he said.