German business confidence bucks shutdown impact
German business confidence improved in February, a key survey showed, as the robust industrial sector of Europe's top economy bears up despite the impact of coronavirus restrictions. The Ifo institute's monthly confidence barometer, based on a survey of 9,000 companies, climbed to 92.4 points from 90.3 points in January, when the index slipped as tougher measures to fight the pandemic were introduced.
Analysts surveyed by Factset had expected a smaller increase of 0.4 points. "The German economy is showing its resilience despite the lockdown thanks to the strong industrial economy," Ifo president Clemens Fuest said in a statement. The manufacturing sector recorded its highest score since November 2018, surging to 16.1 points from 9.1 points last month.
The mood in the services and retail sectors also brightened, inching up to readings of minus 2.2 points and minus 14.6 points respectively. Ifo said managers were upbeat about their current situation, rising to 90.6 from 89.2 points last month, while the expectations subindex jumped to 94.2 from 91.5.
Germany this month extended orders for bars, restaurants, leisure facilities and non-essential shops to stay closed until at least March 7 while allowing schools to partially reopen. Crucially for production, factories have kept up output during the second wave of the pandemic and are seeing strong demand from China in particular.
But it remains unclear when other businesses will be able to resume operations. "It's a nice surprise," said LBBW analyst Jens-Oliver Niklash of the closely watched indicator. "But there won't be a quick and full economic recovery without the prospect of a reopening."
After dropping sharply in January, the number of new infections has plateaued in February in Germany amid serious concerns about highly contagious virus variants. Germany has recorded nearly 2.4 million Covid-19 cases since the start of the pandemic, and almost 68,000 deaths. GDP shrank by five percent in 2020, its worst contraction since the financial crisis of 2009, due to the impact of the pandemic.
The government has forecast a 4.4-percent rebound this year but the uncertain future of the outbreak could force Berlin to revise the estimate downward. Tokyo stocks opened higher as investors adjusted positions following three days of rout and after Wall Street shares finished flat.
The benchmark Nikkei 225 index was up 1.19 percent or 356.15 points at 30,374.07 in early trade, while the broader Topix index edged up 1.16 percent or 22.42 points to 1,951.37.
"Investors are seen adjusting their positions after shares were oversold," said Yoshihiro Ito, chief strategist at Okasan Online Securities.
But "the G7 leaders announced over the weekend that they will continue financial support for the economic recovery", which will "back up the upward trend", he said.
Testimony by Federal Reserve Chairman Jerome Powell this week is likely to support the market, Ito added.
The dollar fetched 105.45 yen in early Asian trade, against 105.46 yen in New York.
On Wall Street, the Dow ended flat at 31,494.32 while the broad-based S&P 500 ended down 0.2 percent and the tech-rich Nasdaq index finished up 0.1 percent.
In Tokyo trading, market heavyweight SoftBank Group jumped 2.27 percent to 10,585 yen while Uniqlo casual wear operator Fast Retailing gained 1.95 percent to 106,800 yen.
Toyota was up 0.50 percent to 8,106 yen while its rival Honda grew 0.83 percent to 3,006 yen. Nissan dipped 0.32 percent to 586.8 yen.