German investor morale records first drop in a year

German investor confidence fell for the first time in a year in July, a key survey said Tuesday, as the prospects for Europe's largest economy seemed to darken once again.

The ZEW institute's closely watched economic expectations index fell to 41.8 points, from 47.5 points in June.

The drop was anticipated by analysts surveyed by financial data firm FactSet, who predicted a fall to 42 points.

The drop was the first time the indicator had dropped since July 2023, concluding a run of 11-straight increases.

"For the first time in a year, economic expectations for Germany are falling," ZEW president Achim Wambach said in a statement.

Wambach pointed to the fact that  "German exports decreased more than expected in May" as a factor behind the worsening mood.

"The political uncertainty in France and the lack of clarity regarding the future monetary policy by the (European Central Bank)" also contributed to the drop, Wambach said.

Recent snap legislative elections in France failed to return a majority for any group, leaving Germany's neighbour in political limbo.

Meanwhile, the ECB is set to hold rates at its next meeting on Thursday after an initial cut in borrowing costs last month.

When and if the central bank will cut rates again to reduce the pressure on households and businesses remains unclear.

Red-hot inflation, which prompted the ECB to raise rates in the first place, has come down but policymakers still see several risk factors that could drive them up again.

While overall German investor confidence fell, their assessment of the current situation rose slightly to minus 68.9 points.

Deutsche Bank analyst Robin Winkler said the opposing moves meant he did not see  "any clear economic signal in the new survey data".