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German investor mood jumps

GERMAN investor confidence jumped the most in more than 15 years in February after the government stepped up efforts to bolster the economy and the European Central Bank signaled that it will cut interest rates to a record low.

The ZEW Center for European Economic Research in Mannheim said that its index of investor and analyst expectations rose to minus 5.8 from minus 31 in January. That's the biggest gain since July 1993 and the highest level since July 2007. Economists surveyed by Bloomberg News expected an increase to minus 25.

ECB policy makers say that they have room to cut borrowing costs further as the euro area battles its worst recession since World War II and retreating energy costs push down inflation. Chancellor Angela Merkel's coalition on January 12 agreed to spend about 80 billion euros (US$102 billion) over two years to boost the German economy, the largest in the 16-nation bloc.

"We expected a significant improvement but the outcome is even better," said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. "Analysts see that the current situation is catastrophic, that it can't get any worse, and more and more people are expecting an improvement."

ZEW said that its gauge of current conditions fell to minus 86.2, the lowest reading in five years, from minus 77.1.

GDP slumps

"The economy isn't past the trough," ZEW economist Sandra Schmidt said in a Bloomberg Television interview. "Developments will remain very weak for a couple of months."

German gross domestic product slumped 2.1 percent in the fourth quarter of 2008 from the third, the biggest drop in 22 years. The economy will shrink 2.5 percent this year, according to the International Monetary Fund.

Daimler AG, the world's second-largest maker of luxury cars, today reported its first quarterly loss since 2007. The Stuttgart, Germany-based company said that it expects a global recession to erode sales this year and impose "further substantial burdens" on earnings.

Infineon Technologies AG Chief Executive Officer Peter Bauer said on Thursday that Europe's second-largest maker of semiconductors faces "many tough challenges" this year.

Germany's DAX stock index fell as much as 2.3 percent yesterday, bringing losses to 10.8 percent this year.


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