Investors in Germany, Europe's biggest economy, turned gloomy this month, as disappointing economic data appeared to cast a shadow over the recovery outlook, a new survey found on Tuesday.
German investors apparently took little cheer from a recent pledge by the European Central Bank to keep eurozone interest rates low for the foreseeable future.
They fretted instead about the fallout for exports from the slowing Chinese economy.
The widely watched investor confidence index calculated by the ZEW economic institute fell by 2.2 points to 36.3 points in July, disappointing analysts' forecasts for an increase to around 40 points this month.
Nevertheless, the index remains in firmly positive territory, ZEW president Clemens Fuest insisted.
"Financial market experts are sticking to their overall positive forecast," he argued.
"This illustrates their confidence in the robustness of the German economy despite the rather weak figures concerning industrial production and foreign trade released recently," Fuest said.
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.The sub-index measuring financial market players' view of the current economic situation in Germany rose by 2.0 points to 10.6 points in July, the first increase in this particular component in four months.
A frequent criticism against the ZEW index is that it can be volatile and is therefore not particularly reliable.
Capital Economics economist James Howat attributed the unexpected drop in the ZEW barometer this months to "disappointing hard data and troubles in Portugal (which) reminded investors that the eurozone crisis is far from over."
Nevertheless, the reading was "still consistent with annual economic growth in Germany of around 2.0 percent," the expert said.
ING DiBa economist Carsten Brzeski said the ZEW data "fit into the current picture that the German economy looks like a grab bag, which has something for everyone."
While optimists could point to the strong labour market, solid private consumption, strong construction growth and confidence indicators at high levels, the pessimists could focus on falling new orders, disappointing exports and the continuing euro crisis, Brzeski said.
He believed that the "stuttering and now slowing Chinese economy is a clear cause of concern and could become a new risk factor for the German economic outlook."
Natixis economist Johannes Gareis said the ZEW data "are better than one might think at first glance and finally point to a stabilisation of German growth during in this year."
Christian Schulz at Berenberg Bank was also wary of reading too much into the numbers.
"Given the volatility of the ZEW index in the past five crisis years, the latest changes were all marginal and do not point to an economic turning point" he said.
As the ZEW expectations index for Germany was still well above its long-term average of 23.7, it was "consistent with German growth rebounding to at least its trend rate later this year," the expert said.