US markets surge after positive EU data

US markets have surged this afternoon after unexpected positive German data and a drop in Spanish borrowing costs provided some respite from the ongoing eurozone debt crisis.

The Dow Jones gained 2% to reach 12,002 points shortly after opening, while the S&P 500 climbed 2.2% to 1,231 points. The Nasdaq also gained 2.2% to 2,579.

Meanwhile the FTSE 100 was up 0.7% to reach 5,402 points by mid-afternoon, while the French Cac 40 and the German Dax both showed healthy gains of 2.1% and 2.5%, reaching 3,037 points and 5,814 points respectively.

Shares rose after Germany reported an improvement in business and consumer confidence today, boosting hopes that Europe's largest economy will avoid slipping into recession next year.

The business confidence index rose in December to 107.2 points as firms said their economic expectations improved. Analysts said the reading surpassed expectations, having forecast a decline in the index to 106 points from November's 106.6.

Meanwhile, investors also showed renewed confidence in Spain today, as a government bond auction saw excessive demand.

A total of €5.64bn worth of notes were snapped up in the auction, which was targeting sales of €4.5bn.

The Madrid-based treasury sold three month debt on an average yield of 1.735%, a substantial decrease on recent auctions. Six month notes were sold at 2.435%.