ZEW Survey on Important Financial Market Values – Banks Expect Slight Changes in Interest Rates, DAX and Euro Exchange Rates by the End of the Year

Capital markets are expected to remain rather calm in the coming six months. Neither short-term interest rates nor the DAX or euro exchange rates are to display any major changes. These are the findings of the ZEW Forecast Survey, a quarterly survey on important financial market values conducted by the Centre for European Economic Research (ZEW), Mannheim, among 17 German banks.

On a six-month horizon, the surveyed banking institutions forecast short-term interest rates in the euro area at an average value of 2.16 per cent and thus assume that monetary policy will remain largely unchanged by the end of the year.

Banks think that by the end of the year the DAX will display a rather low potential compared to the previous months' price increases. At the end of December, the DAX is expected to close at about 4,730 points, which corresponds to an increase of 3.85 per cent compared to the current level. The most optimistic forecast assumes that the DAX will close at 5000 points, the most pessimistic at 4,200 points. The European stock index, Dow Jones Stoxx 50, is to climb approximately 3.1 points by the end of the year, whereas the TecDAX is likely to rise by a meagre 1.5 per cent.

The majority of the banks expect euro exchange rates to recover to 1.28 US dollars in December. The participants thus consider the current weakness of the euro a mere short-term phenomenon.

ZEW Forecast Survey

Since 2001, the Centre for European Economic Research has conducted the quarterly ZEW Forecast Survey on important financial market values among 17 German banks: Bankgesellschaft Berlin, Bayerische Landesbank, BHF-Bank, Commerzbank, Deutsche Bank, Deutsche Postbank, DZ-Bank, Deka Bank, Dresdner Bank, Hamburger Sparkasse, Helaba, HSBC Trinkaus Burkardt, Bank Julius Bär, Nord LB, Sal. Oppenheim, Weberbank, West LB.

Contact

Dr. Michael Schröder, Phone +49(0)621/1235-140, E-mail schroeder@zew.de