German investor confidence improves in October

German investor confidence rose more than expected in October, driven by hopes of lower interest rates, according to a survey released Tuesday. The ZEW institute's economic expectations index climbed to 13.1 points, up from 3.6 in September, surpassing analysts' forecast of 10 points.

The rise in October halted a two-month decline, which saw the index drop sharply in August and September due to pessimistic economic news. ZEW President Achim Wambach attributed the improvement to stable inflation rates and the potential for further interest rate cuts by the European Central Bank (ECB).

Inflation fell to 1.6% in Germany and 1.8% across the eurozone in September, marking the first time in three years that eurozone inflation dropped below the ECB's 2% target. This has fueled speculation of additional rate cuts at the ECB's upcoming meeting.

Investor confidence was further bolstered by "positive signals" from key export markets, including China's new stimulus package. However, despite these gains, Germany’s economy remains sluggish, with the government lowering its 2024 growth forecast, predicting a 0.2% contraction, which would mark a second consecutive year of recession.