German investor confidence rose more than economists forecast to a three-year high in May after stock markets rallied and data signalled the worst of the recession may have passed.
The ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, increased to 31.1 from 13 in April.
European stocks have gained for the past two months on the expectation that government and central bank efforts to revive economic growth will work.
While the German economy shrank at a record pace in the first three months of the year, manufacturing orders and exports unexpectedly rose in March and business confidence rebounded from a 26-year low in April.
“There is enough evidence now to believe that the economy is stabilizing,” said Alexander Koch, an economist at UniCredit Group in Munich.
“The recent market rally will have lifted the mood, and in the second half of the year the stimulus package should kick in.”
German Chancellor Angela Merkel’s coalition will spend about €82 billion to stem the country’s worst recession in more than six decades.
The European Central Bank has trimmed its key rate to a record low of 1 per cent and announced it will purchase €60 billion of covered bonds to help free up credit.
The pan-European Dow Jones Stoxx 600 Index has rebounded 32 per cent from this year’s low hit on March 9th, with Germany’s benchmark DAX Index recording a similar gain.
Commerzbank AG chief executive Martin Blessing said May 15th that Germany’s second-biggest bank will return to profitability by 2011 and doesn’t need any more state aid.
Bloomberg