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Wednesday, 22 August, 2001, 08:49 GMT 09:49 UK
German business confidence bounces back
The Frankfurt stock exchange
German markets were buoyed by the Ifo news
German business confidence, long in the doldrums, took a surprise upward turn in July, according to figures from influential economic institute Ifo.

Ifo's latest monthly business climate index - based on a survey of 7,000 German enterprises - rose unexpectedly to 89.8 in July, after hitting a five-year low of 89.5 in June.

The figure came in far above even the most optimistic forecasts, as most analysts had predicted yet another monthly slump.

The jump in the index, its first upward movement since January, was a rare piece of good news for German industry, which has been flirting with recession for months.

Late last month, the Ifo predicted that Germany's economic slowdown should stabilise - but not reverse - this summer.

The Ifo institute says that three straight months of index gains are required to signal an economic rebound.

Markets cheer

European financial markets were buoyed by the Ifo news.

Germany's blue-chip Dax share index rose more than 30 points to 5,224.36 in the minutes after the release of the figure. It slipped lower later and was marginally down by 0815 GMT.

The euro, which had weakened slightly against the dollar in early trade, bounced back to more than 92 US cents.

Yields on European government bonds increased - an indicator that markets felt the news made a cut in interest rates less likely.

The European Central Bank (ECB) is due to decide on eurozone rates on 30 August, and had been widely expected to go for its first cut in rates since May.

Its counterparts in the UK and, most recently, the US, have cut their rates recently.

But a few mildly positive economic figures over the past few days have muddied the picture on eurozone interest rates, especially since the ECB is notoriously reluctant to help stimulate the continent's growth prospects, prefering instead to keep inflation under control.

BBC's Manuela Saragosa
"A rare bit of good news"
See also:

22 Aug 01 | Business
Germany's feeling the pinch
26 Jul 01 | Business
German slowdown to steady
23 Jul 01 | Business
German confidence hits five-year low
05 Jul 01 | Business
European interest rates held steady
20 Jun 01 | Business
European economy on the skids
10 Jul 01 | Business
German economic woes increase
19 Jun 01 | Business
German warning on growth
10 May 01 | Business
Eurozone rate cut surprise
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