The German ZEW index will remain subject to conflicting forces. On the one hand, ZEW expectations have been strongly correlated to risk appetite and the 5%+ drop in the DAX index from its May peak will not help. On the other hand, German economic indicators have generally beaten expectations, with a few exceptions (retail sales; factory orders) while, perhaps more importantly, green shoots have emerged in other Eurozone countries. However, the severe flooding that hit the country will pose downside risks to economic activity in the near-term. On balance, we believe that the ZEW is more likely to decline, albeit ... (full story)