German industrial output falls unexpectedly, but investor optimism picks up - business live

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Fears that Germany's growth engine stalled in the last quarter have risen after industrial output fell unexpectedly.

Output dropped by 1.8% in May, the third monthly decline in a row, pushed down by geopolitical pressures and the disruption caused by May Day holidays.

Intermediate goods production fell 3%, and consumer goods output dipped by 3.5%, as manufacturers reported lower production levels.

It follows disappointing factory orders data on Friday, and recent increases in seasonally-adjusted unemployment. Commerzbank economists have warned clients that:

"It is likely that German growth will at best come in flat in the second quarter, which suggests the other euro countries and the ECB should not pin their hopes on the German engine of growth for the time being"

Economist Andreas Scheuerle of Dekabank said the April-June quarter is turning into a "massive disappointment".

But Carsten Brzeski of ING is confident that activity will pick up later this year.

The news knocked the European stock markets a little - they're all in the red as midday approaches.

European stock markets, July 7 2014 Photograph: /Thomson Reuters

The news came as Angela Merkel held her 7th visit to China - photos and details here.

The latest survey of eurozone investor confidence was more positive. It rose this month, according to Sentix, partly due to the ECB's latest measures to stimulute growth and fight deflation.

Sentix reported that investors are more upbeat about US and Asian growth prospects.

Photograph: Sentix

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Back in a little while (Mrs W's birthday present won't buy itself)