German business mood brightens for 5th month in a row

German business sentiment rose unexpectedly for the fifth month in a row in March, signalling that Europe's largest economy is proving more resilient than others to the euro zone debt crisis.

The Munich-based Ifo think tank said on Monday its business climate index, based on a monthly survey of some 7,000 companies, rose to 109.8 in March from a revised 109.7 in February.

The closely-watched Ifo index bucked expectations for a steady reading and rose to its highest level since July 2011, just days after data showed the first contraction in German manufacturing this year.

"German Ifo: is the sky the limit?" said Carsten Brzeski, economist at ING in Brussels. "The strong labour market, filled order books and low inventories still bode well for growth in the coming months, albeit at a low level."

The euro rose briefly against the dollar and German Bund futures pared gains on the data.

The German economy has gone from strength to strength since emerging from the 2009 financial crisis, interrupted only by a slight contraction in the last quarter of 2011 when the debt crisis spread further through the euro zone.

Economists say that was a blip, prompting some think tanks to raise their growth forecasts. IWH Halle institute expects the German economy to grow by 1.3 percent this year, almost twice the government's forecasts for a 0.7 percent expansion.

But the rise in business sentiment was not as broad-based as in recent Ifo surveys - the mood worsened slightly in all branches except retailing. Manufacturing, construction and wholesaling were more downbeat, though manufacturers told Ifo they expected "positive impulses from export business".


RISKS IN OIL, INFLATION

Last week, data showed that the manufacturing sector had shrunk for the first time this year, raising concerns over Germany's resilience to the debt crisis and prompting some to conclude that growth expectations may have been overstated.

Despite the rise in the Ifo reading, there are risks to growth. Ifo economist Klaus Wohlrabe told Reuters that inflation and high oil prices may be a threat to firms.

"That's not visible yet in retail," said Wohlrabe. "But you can feel it in wholesale. It's not a big danger yet for companies, but it's a potential risk."

And economists said the pace of growth could slow.

"We don't expect the German economy to have contracted again in the first quarter," said Commerzbank economist Joerg Kraemer. "But recent mixed data suggest that there's a limit even to the strongly competitive German economy."

An Ifo sub-index on current conditions remained steady at 117.4 and a reading on expectations rose slightly to 102.7, less than in previous months, prompting Ifo to say the economy was losing some of its momentum.

With the euro zone due to contract this year, a downturn in export markets may hurt German growth.

Gold Increases as ECB grabs attention

The precious gol has inched up on Tuesday after two session of losses, supproting by the cheerful data about the Euro-Zone, ahead of a major cash injection by the European Central Bank expected later during this week.

The yellow metal has soared about 3 percent last week, as the Grece bailut deal and expecations of more monetary easing. On Wednesday, the ECB will support the Greec financial crisis by another batch of three-year which calls as ultra-cheap loans offered.

On the other hand, the greenback inched down against a basket of currencies, drawing buyers holding other currencies to dollar-denominated commodities. 

Increasing machine orders in Japan adding to signs of recovery in the nation's manufacturing sector

Japan's machine orders inclined in September more than analyst's estimates amid improvements witnessed in the nation's manufacturing sector which showed clear signs of recovery even if production levels remains lower than last year's levels. 

Japan economy has announced the monthly figures for Machine orders which showed a gigantic boost of 11.0% during August, compared with the prior reading of -8.2%, and on top of the expectations of 3.9%. 

Moreover, the yearly figures for Machine orders was declined to 2.1% compared with the prior reading of 4.0%, however it came above forecasts of -3.6%. 

Exports also rose and started participating effectively in the recovery process, having overseas shipments soard during this period. Further, the demand from China that is leading recovery in the Asian region helped Japan's exporters to offset losses incurred by the end of last year and the beginning of this year. 

We can expect that if capital spending continued to improve, we should see conditions in the labor market getting better, keeping in mind that unemployment fell. Household spending will increase as income levels are moving forward, that may help to ease the decline in prices and support the economy to fight deflation that continued to weigh on economic activity. 

On the other hand, Japan's economy continued to show many fundamental data that confirmed it has many alternatives ways to record an expansion during these months as investment sector picks up. 

Furthermore, the government in Japan is working to keep the recovery going, which work to cope the yen's appreciation, where Bank of Japan (BOJ) has intervened into the market to sell the yen against the dollar to cool the yen's advance, as the substantial rise in the Japanese yen against the dollar and its all major counterparts. 

The Bank of Japan noted that the economic recover bas returned to normal level and now is picking up amid the sluggish global economy, while the economy is facing a downward pressure as the European financial crisis beside the sluggish US economy. 

Yet, Japanese economy success to start the recovery phase this quarter as the industry sector continued to introduce more cheerful signs these days after manufacturers restored their production cycle after the massive quake that hit the nation during the first quarter of this year.