Germany's economy stalls and European stocks tumble

08/16/2011 9:15 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

It looks like today Germany will take away what Japan gave investors yesterday.

I think this just highlights how tough it is to value stocks right now. The global economy is slowing, but if we don’t know by how much, we’re just guessing at share prices.

Yesterday, August 15 global stock markets rallied when second quarter GDP in Japan fell by an annualized rate of 1.3% instead of the 2.5% decline economists had forecast.

Today an unexpected stall by the German economy has taken down European stock markets. The German DAX index was down almost 1.9% as of 11:30 a.m. in Europe. The French CAC 40 and the Spanish IBEX 35 indexes were each down 1.4%.

The problem is data released this morning showing that GDP in the 17-country EuroZone rose by just 0.2% in the second quarter. That is a big drop from the 0.8% growth in the first quarter of 2011. Economists had been looking for 0.3% growth, according to a survey by Bloomberg. Measured year-to-year the EuroZone economies grew by a 1.7% rate.

The weaker than expected growth came from a virtual stall in Germany, Europe’s biggest economy. German GDP rose by just 0.1% in the second quarter after growing by 1.3% in the first quarter. This German stall echoes a French stall in the second quarter that was announced by the French government last week.

The biggest drop came in EuroZone exports, which fell a seasonally adjusted 4.7% in June from May.

Germany’s DAX index is now down 15% in the last two months and the wider Stoxx Europe 600 is down 11% in the period.

 

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