EUROPE MARKETS: German Stocks Jump, Euro Rises As German Economic Mood Improves

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- German stocks surged to intraday highs Tuesday, bolstered as a closely watched survey indicated the mood in Europe's largest economy appears to have improved.

The lead economic-sentiment indicator from the Centre for European Economic Research, or ZEW, was 11.5 in November.That compares with October's dismal reading of negative 3.6, which marked the first time the survey was in negative territory since November 2012.

The most recent result was well above expectations of a rise to 0.9, in a Dow Jones survey of economists. The ZEW report follows data released last week showing Germany narrowly avoided recession in the third quarter.

"The better-than-expected German ZEW survey may help ease concern about Europe's locomotive," said currency analysts at Brown Brothers Harriman in a note Tuesday. The ZEW indicator of current conditions rose to 3.3 in November, from 3.2 in October. "It does not sound like much, but the consensus expected another decline," said BBH analysts.

Although there were bright spots from the ZEW survey, "we think that it may be over-optimistic," said Nour Al-Hammoury, chief market strategist at ADS Securities, in a note. "Economic activity in Europe is deteriorating due to the global slowing and had not been helped by the Russian sanctions."

Markets: In Frankfurt, the DAX equity index jumped 1.2% to 9,416.02 after the report, with all 29 of its 30 components trading higher, led by a 1.5% rise in shares of chemical firm Lanxess AG . Shares of air carrier Deutsche Lufthansa AG lagged the index, losing 0.2%.

The advance for the DAX helped the Stoxx Europe 600 extend its rise to 0.5%, at 3,390.01.

The euro (EURUSD) also climbed to an intraday high at $1.2514 against the dollar following the ZEW data. It has since came off session highs to buy $1.2516, compared with $1.2450 late Monday. The shared currency "is likely to remain under pressure as the European Central Bank is hinting for a full quantitative easing," said Al-Hammoury.

Meanwhile, the dollar fell against the pound (GBPUSD) after a report that inflation in the U.K. accelerated in October to 1.3%, from 1.2% in September, largely stemming from smaller declines in prices for fuel and airfares than in the year-ago period. Economists polled by The Wall Street Journal had expected the rate to remain at 1.2%.

"The overall [dollar] theme today appears to be one of consolidation" encouraged by the U.K. inflation and ZEW data, said BBH analysts led by Marc Chandler.

The pound (GBPUSD) bought $1.5663, up from $1.5650 late Monday.

The U.K.'s FTSE 100 index rose 0.4% to 6,698.06, and in Paris, the CAC 40 tacked on 0.7% at 4,257.11.

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