The ZEW index of sentiment increased for the fourth consecutive month, rising sharply from 5.4 in February to 22.3 in March – its highest level since June 2010.
“Currently, it seems as if the crisis in the Eurozone has taken a pause for breath,” said ZEW president Dr Wolfgang Franz.
“In Germany, due to the good employment situation, domestic demand is likely to continue to stimulate growth. Nevertheless, risks remain due to the low business activity in important European countries and the disruptions in the banking sector.”
Germany’s DAX stock index rose 1.37 per cent in the day, the French CAC jumped 1.72 per cent and the FTSE100 rose 1.07 per cent.
Meanwhile Italy received a further boost as the government paid just 1.4 per cent to borrow €8.5bn (£7.1bn) in one-year debt, down sharply from the 2.23 per cent paid a month ago, indicating investors are increasingly convinced that Prime Minister Mario Monti’s efforts to cut the deficit and reform the economy will work.