German investor sentiment hits 13-month high

Investors in Germany are optimistic about the outlook for Europe's biggest economy given the strength of domestic demand, but concerns about Greece and Ukraine could sour sentiment in future, data showed on Tuesday.

The widely watched investor confidence index calculated by the ZEW economic institute rose for fifth consecutive month to a 13-month high of 54.8 points in March, ZEW said in a statement.

"Economic sentiment in Germany remains at a high level. In particular, the continuing positive development of the domestic economy confirms the expectations of the experts," said ZEW president Clemens Fuest.

"At the same time, limited progress is being made with regard to solving the Ukraine conflict and the sovereign debt crisis in Greece. This has a dampening effect on sentiment," Fuest added.

The index fell short of analysts' expectations for a more robust rise to 60.0 points.

For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The sub-index measuring financial market players' view of the current economic situation in Germany jumped by 9.6 points to 55.1 points in March, its highest level since July 2014.

"The March ZEW reading may have disappointed analysts' high expectations. But optimism is still growing," said BayernLB economist Stefan Kipar.

"It could also feed into hard economic data in the coming months," Kipar said. But "momentum may remain moderate against the backdrop of uncertainty surrounding Greece and Ukraine," he added.

Natixis economist Johannes Gareis felt the Greek crisis "is steadily disappearing from the radar screen of German investors."

This was reflected in the strong rise in the blue-chip DAX index which is now firmly above 12,000 points, driven by optimism about the European Central Bank's ultra-expansive monetary policy, the expert argued.

"At this stage, there is no strong case for beginning to question the strength of Germany's economic recovery," he said.

Berenberg Bank economist Christian Schulz attributed the rise in the ZEW index to "the tailwinds of cheap oil, a weaker euro and lower funding costs for companies and households."

However, the new Greek risk may be dampening optimism somewhat, he cautioned.

ING DiBa economist Carsten Brzeski felt that over the last two years, the ZEW index "has returned as an interesting and more reliable indicator for future economic growth."

"As a main beneficiary of the ECB's programme of quantitative easing, supported by sound domestic fundamentals, the German economy should power ahead," he said.