Further weakening expected in ZEW

The ZEW investor economic sentiment indicator may weaken further in June, to 34.6 from 41.9 before. This would still leave it 0.2 standard deviations above its long-run average. Interestingly, the assessment of current conditions remains much more elevated and a smaller drop to 61.4 is expected, from 65.7 before, states Societe Generale. 

The strength seen also in other surveys of current business conditions leads to believe that much of the weakness in expectations is a result of higher volatility in financial markets following the bund sell-offs and increased concerns over Greece. Also from the real economy, there are somewhat better data coming out again, and the weakening in expectations may soon come to an end, unless further shocks take place, expects SocGen. The outlook remains for fairly robust GDP growth in Q2, is likely to be at 0.6% qoq, weakening slightly in H2 and into next year, adds SocGen.