German investor morale sours in June

FRANKFURT | By Michelle Martin and Kirsti Knolle

The skyline of the banking district is pictured in Frankfurt, October 21, 2014.

Reuters/Ralph Orlowski

The mood among analysts and investors in Europe's largest economy took a sharply pessimistic turn in June, with a sentiment indicator dropping to a seven-month low as the Greek crisis and subdued global growth frayed nerves.Mannheim-based think tank ZEW said on Tuesday its monthly survey of German economic sentiment fell to 31.5 points from 41.9 in May, undershooting a Reuters consensus forecast of 37.1.
The weakest reading since November helped send the euro to a day's low of $1.12465.

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"June's sharp fall in ZEW investor sentiment suggests that the German recovery is suffering from fears about the impact of the Greek crisis," said Jennifer McKeown, senior European economist at Capital Economics.
She said the economy was likely to grow by almost 2 percent this year as the weaker euro aids German exports but slow in 2016 as the boost from a weaker euro and falling energy inflation peters out.
"And there is clearly a risk of a more rapid
slowdown if the Greek crisis is not resolved quickly," McKeown added.
Greece and its creditors have hardened their stances after the collapse of talks aimed at preventing a default and possible euro exit, prompting Germany's EU commissioner to say on Monday that the time had come to prepare for a "state of emergency".
ZEW President Clemens Fuest said external factors such as the doubts over Greece's future and the global economy's "restrained dynamic" were limiting the opportunities for Germany's "good economic situation" to pick up further.
Earlier this month, the Bundesbank raised its forecasts for growth in Europe's largest economy for both this year and next as workers benefit from a robust labor market and hefty wage hikes.
Germany's export-driven economy is being helped the euro's 10 percent fall since it became clear in early December that the European Central Bank would begin buying bonds.
ZEW's separate gauge of current conditions dropped to 62.9 points from 65.7 in May, coming in weaker than a consensus forecast for a reading of 63.0.
The index was based on a survey of 229 analysts and investors conducted between June 1 and June 15.
(Additional reporting by Maria Sheahan; Writing by Paul Carrel and Michelle Martin; Editing by Catherine Evans)