German business confidence hits a one-year high
The Ifo business climate index rose to 88.8 in August, from 86.7 in July, substantially beating expectations. This is the strongest reading in about a year.
Companies reported both better current conditions and stronger expectations. This follows recent improvements in industrial production, exports and manufacturing surveys.
That said, the labour market still needs to catch up. Friday’s Federal Employment Agency report will be the next important test of whether stronger business activity is finally translating into more hiring.
ECB increasingly likely to raise rates again in September
ECB policymakers are preparing for another 25-basis-point rate increase in September, which could take the key policy rate from 2.25% to 2.50%.
As eurozone inflation remains close to 3%, petrol and natural-gas prices are elevated, and the economy has proved more resilient than expected. Policymakers reportedly do not currently want to signal a long sequence of additional hikes.
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Oil drops sharply
Brent crude has fallen by more than 2% to around $86.4 per barrel, extending Tuesday’s decline, after Iran resumed talks with Oman regarding management and possible reopening of the Strait of Hormuz.
That is particularly welcome for Germany because recent inflation has been heavily driven by energy and transport costs.
If oil stays closer to the mid-$80s instead of returning above $90-100, it would reduce pressure on:
petrol and diesel, freight costs, flights, household inflation and potentially future ECB policy.
Geopolitical risk remains high, however, so the recent decline should not yet be treated as a permanent normalization.
Germany’s public deficit rises
Germany’s general-government deficit reached €71.3 billionin the first half of 2026, €36.6 billion more than a year earlier. The deficit amounted to 3.1% of GDP, slightly above the EU Maastricht reference level of 3%.
This matters indirectly for households because Germany is simultaneously expanding infrastructure and defence spending while facing rising pension and healthcare costs.
The result is substantially more government borrowing, which is one reason German long-term bond yields have climbed and mortgage financing has remained expensive.
Phishing remains active
Verbraucherzentrale’s phishing radar was updated on 25 August and continues to flag fake messages impersonating banks and other institutions. Typical messages manufacture a short deadline, threaten account restrictions and direct users to a fraudulent login page.
Market Review
|
Market proxy |
Daily change |
Quick interpretation |
|---|---|---|
|
MSCI World |
+0.35% |
Global equities recovered as lower oil prices and bond yields improved investor sentiment. |
|
S&P 500 |
+0.32% |
US large caps edged higher as inflation concerns eased with falling oil and yields. |
|
Nasdaq-100 |
+0.62% |
Technology led the rebound as chip stocks rallied ahead of Nvidia’s earnings. |
|
Germany |
+0.69% |
German equities benefited from stronger GDP data and a sharp improvement in business confidence. |
|
Euro Stoxx 50 |
+0.03% |
Eurozone large caps were nearly flat as economic optimism was offset by expectations of another ECB rate hike. |
|
Emerging Markets |
+1.57% |
Emerging markets rebounded strongly as lower yields and improved global risk appetite supported international equities. |
Market mood
A modest rebound, led by technology and emerging markets. Falling oil and bond yields improved risk appetite.
Bottom Line
Germany’s recovery is becoming harder to dismiss. Q2 GDP was revised upward to +0.3%, exports rose strongly and business confidence reached a one-year high. The key question now is whether Friday’s labour-market report confirms an improvement in hiring.