ET:Eurozone debt crisis: German data lifts gloom, ECB funds eyed
LONDON: European shares and the euro rose on Tuesday on surprisingly good news about the German economy and a better-than-expected outcome at a Spanish treasury bill auction, but concerns about the euro zone debt crisis limited gains.
The Munich-based Ifo think-tank said German business sentiment rose sharply in December, defying expectations it would decline and underscoring the resilience of Europe's biggest economy.
"The business climate in retailing and domestic construction has improved, said Klaus Abberger, the survey's coordinator.
"At the moment I don't think we (Germany) will fall into recession again."
The euro was up about 0.6 per cent to $1.3080 and away from Monday's low of around $1.2983. The single currency hit an 11-month low of $1.2944 last week.
"Sentiment remains fragile towards the euro," said Simon Derrick, head of currency research at Bank of New York Mellon.
"You just need another piece of bad news and the euro will be nudging closer to its 2011 lows," he said.
The FTSEurofirst 300 index of top European shares was up 0.5 per cent at 962.14 points in choppy trade, following a 4.3 per cent slide over the past two weeks. The euro zone's blue chip Euro STOXX 50 index was up 0.8 per cent at 2,221.36 points, following a near 9 per cent drop in two weeks.
However, the MSCI world equity index was around 0.25 per cent higher after starting flat.
SPANISH AUCTION LIFTS SENTIMENT
Investor sentiment in the euro zone government debt market picked up after Spanish short-term financing costs were seen to fall at an auction of new three- and six-month Treasury bills.
Analysts said part of the reason was that banks were planning to tap a three-year liquidity offer from the European Central Bank on Wednesday to pay for the relatively high-yielding paper.
For the first time the ECB plans to offer banks unlimited amounts of low-cost, three-year funds against collateral now defined more broadly, which some hope will encourage buying of high-yielding Spanish and Italian bonds.
However, with Europe's banks being urged by regulators to de-risk, raise capital and keep lending to business, others believe they may be reluctant to invest in sovereign bonds and instead repay their own debts and boost their balance sheets.
