13.08.201405:21:48UTC+00German investors takes hit from Russian tensions

Recently released data shows that the confidence of German investors plunged during the month of August due to tensions present between Russia and the rest of the west that threaten to stagnate Europe’s economy.

Latest results of the ZEW indicator of economic sentiment shows that investor confidence dropped from July’s 27.1 points to its lowest level in 20 months of 8.6 points exceeding market expectations. Economists surveyed by Reuters had only originally predicted a fall to 18.2 points.

The index is a measure of expectations among investors regarding the economy within a timeframe of six months. It has been falling for eight straight months partly due to the poor and fragile recovery of the eurozone as a whole which threatens to wipe out growth in the country.

Germany is forecast to be one of the most hard hit countries because of their status as Russia’s top trading partner from within the European Union. ING economist Carsten Brzeski claims that, “Fear is back. The German ZEW just sent more signs of caution, showing that at least financial market participants are increasingly becoming pessimistic."

Brzeski also acknowledged the fear of the second quarter performance becoming the beginning of an undesired trend should the effects of sanctions on and by Russia spread past a reduction of exports to the country.

A report containing initial estimates of Germany’s gross domestic product is expected to be released on Thursday. Analysts believe that there is a strong likelihood it will show that the eurozone member did not grow in the second quarter after expanding 0.8% in the first three months of the year. Growth for the eurozone itself is predicted to dampen further from 0.2% in the first quarter to 0.1% between April and June.