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Analysts at TD Securities note that the deterioration in the German construction and services sector dragged the headline index lower this month.

Key Quotes:

“German IFO data was disappointing with the headline index unexpectedly falling 0.4pts to 95.9 in January (mkt 97.0), with all the downside coming from expectations as it slipped to 92.9 (mkt 94.8).

Looking at the details of IFO expectations, manufacturing did manage to gain some further ground in Jan, though is still sitting well into negative territory.

The weakness came from construction (worst print since Dec 2014) and services, which gave back all of December’s short-lived blip higher and is sitting around zero.

While markets have generally been more upbeat on the back of the US-China trade deal, in the Eurozone the risk still exists that some of the weakness we saw in manufacturing through 2019 spills into the services sector.”