German confidence lifts Europe shares to 18-month high

Tue Dec 11, 2012 8:30am EST
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By Marc Jones

LONDON (Reuters) - European shares hit an 18-month high and the euro climbed on Tuesday, buoyed by a pick-up in German confidence indicators and expectations the Federal Reserve will keep pumping money into the U.S. economy.

Wall Street shares were likely to crawl higher too, with futures prices pointing to a 0.22 rise in the S&P 500 and 0.26 percent and 0.30 gains in the Dow Jones and Nasdaq 100.

Following some disappointing euro zone data this month, the ZEW survey provided some relief for markets, showing confidence among German investors and economists increased sharply this month.

Markets had been rattled on Monday by Italian Prime Minister Mario Monti's announcement he would step down some weeks early. But the upbeat ZEW data helped lift shares and the euro from their gloom.

The pan-European FTSEurofirst 300 share index .FTEU3 rose to 1137.90 points, its highest since June 2011, though it later eased back a little. Italian bonds shrugged off their early morning weakness and the euro jumped to four-day high of $1.29970.

Many economists expect the German economy to contract in the fourth quarter under the weight of the euro zone's troubles, but leading indicators like the ZEW and a separate survey from the Ifo institute now suggest it could bounce back in early 2013.

"The (ZEW) rise confirms earlier worldwide survey results signaling that the global industrial cycle has turned and that world trade is picking up," said Aline Schuiling a senior economist at ABN Amro.

FED FOCUS   Continued...

A city trader monitors stock prices in London.