Slightly better economic news from China and Germany countered concerns over Europe's 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. The latest survey of German economic sentiment, conducted by the ZEW think tank, posted its biggest ever monthly rise in January, easing fears of a recession in Europe's largest economy. 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,” Andrew Milligan, head of global strategy at Standard Life Investments, said. The strong reading on German business sentiment, while encouraging, still indicated tough times ahead for the euro zone's largest economy, economists said “The (ZEW) index is still consistent with a majority of investors expecting economic conditions to deteriorate in future,” Ben May of Capital Economics said. “This is a worry given recent comments from the German statistical office which indicated that the economy contracted in Q4,” he added. But the news gave an instant boost to the euro, already stronger after the Chinese data earlier. The euro jumped to a session high of $1.2800, roughly 1 percent higher on the day, and moved away from a 17-month low of $1.2624 hit last week. European shares broke through technical resistance levels to hit fresh five-month highs after the ZEW news, to be up 1.1 percent at 1,037.17 points. The MSCI world equity index gained by around 0.9 percent after rising during Asian trade on the Chinese data. A growing number of experts, including a Standard and Poor's official, have warned a default was on the cards after Greece's talks with creditors broke down on Friday. Greece is under growing pressure to secure a last-ditch agreement with its private creditors to accept voluntary losses on their holdings of Greek bonds. “There is a lot of uncertainty about the euro zone. The downgrades were expected, but what the market is really concerned about are the Greek debt restructuring talks,” said Ankita Dudhani, G-10 currency strategist at RBS. Standard and Poor's late on Monday added to the euro zone's woes by downgrading the EFSF rescue fund by one notch to AA-plus, but coming after its downgrades for nine governments last week the move was widely expected.
