European shares climb on the back of German data

European markets extend gains reaching three-week highs following strong German data. By the end of trading the FTSE had gained just shy of 1%, the DAX over 1.6% and the CAC jumped over 1.8%.

Shares across Europe were boosted by the stronger than forecast German ZEW business sentiment data. The figure for February of 48.2 smashed both the expectation of 35 and the January figure of 31.5. This is the highest sentiment figure since April 2010 and very much underlines the expectation that 2013 could be the year when the Eurozone crisis bottoms out and the recovery begins. Despite German growth figures recording a contraction of 0.6% in Q4 of last year this positive sentiment figure adds to comments by the Bundesbank yesterday that the German economy is not expected to fall into recession this quarter.

However, we should not get carried away with the survey data and keep an air of caution especially considering car registration data released this morning which reached a new low for January with an 8.5% decline. The poor figure is stark contrast to the German sentiment data and reflects the worsening state of the European car market, a sector strongly hit by the economic problems of the Eurozone.

Looking at equities, most UK stocks traded positively although Vodafone and HSBC put pressure on the FTSE following broker downgrades. On the positive side Tesco climbed higher after JP Morgan gave the supermarket retailer an overweight rating but Sainsbury’s and Morrison’s were stamped with underweight ratings causing their share prices to decline 0.15% and 1.17% respectively.

Tomorrow looks to be a full day with regards to economic data with inflation figures due from both Germany and Europe then we have the Jobless figures out for the UK in the morning. Going into the afternoon European Consumer confidence, US housing starts and minutes from the FOMC Meeting will catch investors eyes.