The German February ZEW investor survey jumped to -5.8 from -31 in January. This was much better than our median of -25 and the sharp improvement, which is the fourth consecutive rise in the ZEW, confirms that confidence has bottomed out. The negative reading means pessimists are still outnumbering optimists, which is consistent with ongoing negative growth in Q1 and Q2 this year, but the renewed improvement backs hopes for a gradual stabilization and improvement in overall GDP growth in the second half of the year. The surprisingly strong number will not prevent a March rate cut, but it will back the ECB's reluctance to cut the refi rate close to zero.

Meanwhile, the Euro-Zone posted a sa December trade deficit of EUR 0.3 bln, up from a sa deficit of EUR 4.0 bln in the previous month. Exports dropped 0.9% m/m, but import an even stronger 3.9% m/m. The latter is likely to be largely a reflection of lower oil prices in December and real developments will look somewhat less negative than imports. Unadjusted data showed a deficit of 0.7 bln, versus a deficit of EUR 3.9 bln in December last year and a deficit of EUR 5.8 bln in November. Data for the full year 2008 showed deterioration in the nominal trade balance and a deficit of EUR 31.1 bln, versus a surplus of EUR 15.8 bln in 2007. The slowdown in world growth is hitting Euro-Zone exports hard and net exports are expected to detract from overall GDP growth this year.