Brighter economic news offsets Greek debt fears

Tue Jan 17, 2012 7:34am EST
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By Richard Hubbard

LONDON (Reuters) - Slightly better economic news from China and Europe countered concerns over the euro zone debt crisis on Tuesday, lifting European shares and the single currency, but Greek default fears and a looming debt sale by Spain held gains in check.

U.S. stock index futures also pointed to a higher open on Wall Street after the holiday weekend with a number of top companies, including Citigroup Inc (C.N: Quote), due to report quarterly results.

German investor sentiment posted its biggest ever monthly improvement in January, helped by recent upbeat data and hopes the European Central Bank's efforts to ease the region's debt problems.

The German data followed earlier numbers from China showing a much-feared slowdown in the world's second-largest economy was not as great as some had expected and still kept alive hopes for more policy easing measures from the government.

"Investors are happy to look through any longer term worries about Greek debt, and are anticipating some significant policy easing in China after the data released today to boost global activity into the spring of 2012," said Andrew Milligan, head of global strategy at Standard Life Investments.

The strong reading on German business sentiment, while encouraging, still indicated tough times ahead for the euro zone's largest economy, economists said. While the ZEW sentiment index improved markedly, it remained in negative territory.

"The (ZEW) index is still consistent with a majority of investors expecting economic conditions to deteriorate in future," Ben May of Capital Economics said.

The brightening economic news gave investors encouragement to move into riskier assets, lifting the euro and causing the U.S. dollar to drop against a range of currencies, including the Australian and New Zealand dollars.   Continued...