German business sentiment improves in September, ECB LTROs come in much below expectations

German business morale unexpectedly improved in September, as companies benefited from strengthening domestic demand in Europe's largest economy, shrugging off risks from slowing growth in emerging markets. However, the survey was made before the pollution cheating scandal at Wolfsburg-based car maker Volkswagen. The sentiment gauge climbed to 108.5 in the reported period from a revised 108.4 in August. In the meantime, another data release from Germany showed consumer optimism falling for the fourth month in a row in September. The indicator dropped to 9.6 points over the given period, compared with 9.9 points in August. At the same time, the data release from Italy revealed that retail sales in the Euro area's third largest economy accelerated their pace of growth and left negative territory in July. According to the Istat, consumer spending at retailers ticked 0.4% higher in the seventh month of the year on a monthly basis, following a 0.4% decline in June. 

Meanwhile, the Euro area is struggling to boost investment as its fragile recovery remains under the pressure from a slowdown in emerging economies. The ECB attracted just 15.5 billion euros of demand from borrowers for the latest round of its long-term refinancing operations programme, which is noticeably lower than 74 billion euros lent in a similar operation in June.