Investor sentiment in Germany rose sharply again in December driven by a weak euro and plunging oil prices, a survey found on Tuesday, underlining a sunnier outlook for Europe's top economy.
The widely watched investor confidence index calculated by the ZEW economic institute jumped by 23.4 points in December, after increasing for the first time this year in November, ZEW said in a statement.
It said there was abundant evidence that faith in Germany among financial market experts was being restored.
"This renewed confidence remains linked to the auspicious economic conditions including the weak euro and the low price of oil," ZEW president Clemens Fuest said in a statement.
"This positive trend could be seen in the recent data for German exports. But it should be noted that the current economic optimism is fostered by factors that can change quickly."
For its 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 also rose, by 6.7 points.
In November the ZEW headline indicator had bounced back for the first time in 2014, adding to signs that the German economy is stabilising and providing a boost for the eurozone as a whole.
After hitting a 22-month low in October, the index jumped to 11.5 points from minus 3.6 points the previous month.
Last week Germany reported that its trade surplus had grown slightly in October, with imports showing a sharper decline than exports due in part to the weaker euro.
- 'Poisoned apple' -
A frequent criticism of the ZEW index is that it can be volatile and is therefore not particularly reliable.
As a result, analysts were cautious about reading too much into the December data.
"December's sharp rise in German ZEW investor sentiment is an encouraging sign that confidence has so far not been hit by renewed problems in Greece, but the improvement is at odds with the weakness of the more reliable PMI" or purchasing managers' index, said Jennifer McKeown, senior European economist at Capital Economics in London.
The German PMI had declined in December, McKeown noted, and said that she maintained her view "that the Germany recovery will be steady rather than spectacular and that additional policy support is still required in Germany and the eurozone as a whole" to boost growth.
Christian Schulz of Berenberg Bank said "the evidence that Germany’s economy is about to reaccelerate after a rough patch is mounting" but warned there may be "new wobbles ahead".
"The market rout triggered by political risks in Greece as well as the economic fallout of sanctions and the sharply lower oil price for Russia are bound to leave traces in German investor confidence in the coming months, if sustained," he said.
Carsten Brzeski, chief economist at ING-Diba bank in Frankfurt, said the ZEW index, with the headline number showing its strongest monthly increase since January 2013, and the weaker PMI sent "mixed signals".
"The economy should benefit from a very special stimulus package: the weaker euro and the sharp drop in energy prices," he said.
"To some extent, however, this very special stimulus package could also be the poisoned apple as it could delay necessary structural reforms."