Europe: Brighter outlook lifts German business confidence

GERMAN business morale improved for the tenth consecutive month in January, boosted by better conditions and a brighter outlook, a leading survey from the IFO Institute showed yesterday.

The business climate index rose 1.2 points to 95.8, the highest level since July 2008 and just short of the long-term average, while the expectations index leapt 1.7 points to a 30-month high of 100.6. This contradicts many forecasters’ predictions of a slowdown in growth during 2010.

Separately, European Central Bank (ECB) council member Ewald Nowotny said that short-term capital inflows into emerging markets have created “concrete risks of asset bubbles”.

He pointed to proprietary trading, which has come under fire in the US, as one possible driver of these bubbles and suggested that regulation could be a solution.