German investor morale brightens in September as trade angst eases

BERLIN (Reuters) - The mood among German investors brightened unexpectedly for the second month in a row in September, a survey showed on Tuesday, as concerns about an escalating tit-for-tat trade dispute faded.

The ZEW research institute said its monthly survey showed economic sentiment among investors improved to -10.6 from -13.7 in August. This compared with the Reuters consensus forecast for a reading of -14.0.

"During the survey period, the currency crises in Turkey and Argentina intensified, while German industrial production and incoming orders were surprisingly low in July," ZEW President Achim Wambach said in a statement.

The ZEW survey comes after the influential Ifo survey showed German business sentiment picked up for the first time this year in August.

German exports and industrial output both fell unexpectedly in July, hit by U.S. President Donald Trump's protectionist trade policies and bottlenecks in the auto sector caused by new environmental standards.

"Despite these unfavourable circumstances, economic expectations for Germany improved slightly," Wambach said, adding that fears regarding economic development had diminished following a trade deal between the United States and Mexico.

Trump has struck a trade deal with Mexico and threatened to update the North American Free Trade Agreement (NAFTA) without Canada.

Moving ahead without Canada would kill NAFTA, which covers $1.2 trillion in trade between the three countries, and spook financial markets. But Canada's top trade negotiator said on Friday that she and her U.S. counterpart were making "very good progress" in talks to save NAFTA.

A separate ZEW gauge measuring investors' assessment of the economy's current conditions rose to 76.0 from 72.6 in the previous month. The Reuters consensus forecast was for a reading of 72.0.

(Reporting by Michael Nienaber; Writing by Paul Carrel; Editing by Michelle Martin)