German investor sentiment index soars at start of 2011

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German financial market confidence leapt in January as investors welcomed strong order levels, low interest rates and positive data from the United States, the ZEW research institute said Tuesday.

The group's confidence index soared to 15.4 points from 4.3 points in December, its highest level since July 2010 as the biggest economy in Europe geared up for more growth in 2011.

Analysts polled by Dow Jones Newswires had expected the volatile German index to reach a more modest 8.0 points, and the new level remained below the historical average of 26.8 points.

The ZEW indicator, based on a survey of 284 analysts and institutional investors, suggested that "financial market experts expect the dynamic growth of the German economy to continue," a statement said.

"This development is backed by current data on incoming orders in the German industry," it added.

In November, German industrial orders gained a surprise 5.2 percent from the level in October, provisional data showed on January 6.

ZEW president Wolfgang Franz also highlighted the "currently low level of real interest rates" that should boost demand for German goods and said good data from the US had raised hopes that global growth would continue.

German growth should get an additional boost from increased job security, which stimulates domestic consumption, Franz added.

Meanwhile, investors' assessments of their current situation changed little, rising by just 0.2 points to an indexed 82.8 points, the highest level since August 2007.

ING senior economist Carsten Brzeski said: "It looks as if there is almost blind trust in the strength of the German recovery."

At Capital Economics, Ben May called the improvement "pretty encouraging," but added that looking ahead, "this will not be enough to prevent pretty lacklustre growth in the region as a whole this year."

© 2011 AFP

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