-German economic confidence improves
-Monti says Italians fed up with party politics
-Rehn opens door to more flexible deficit targets

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European equities surged Tuesday as the economic sentiment improved for Germany, the 17-nation bloc's biggest lender.

The economic sentiment for Germany increased by 16.7 points in February 2013 to 48.2 points, increasing for a third month in a row, according to ZEW Institute data.

It beat the consensus estimate of 35.0.

"The financial market experts have made their peace with the weak fourth quarter of 2012," said ZEW President Wolfgang Franz.

"In their opinion the German economy faces less headwinds from the euro crisis than throughout the last months."

Economic expectations for the Eurozone increased significantly in February. The respective indicator rose by 11.2 points to 42.4 points.

Italians prepare to head to the polls

Italian Prime Minister Mario Monti said he may not have the ability to entertain audiences of his predecessor, Silvio Berlusconi, but he hopes that in the upcoming election citizens will demonstrate that they tired of being told unrealistic stories.

In a televised interview with Lateline, Monti said he believed Italians were fed up with traditional party politics and he was confident they would vote in a way that would best benefit the country.

He also highlighted his role in bringing the country out of its debt when he stepped in as prime minister in 2011.

"Italy was in a very critical state about 13 months ago," he said.

"I had never been in politics. I was asked to avoid a financial disaster. We managed to avoid that and we have been putting Italy on solid ground towards more growth and competitiveness. I don't know whether this is a good reason or not."

Italians will head to the polls on February 24th and 25th.

Europe may get more time to reduce deficits

European Commissioner for Economic and Monetary Affairs Olli Rehn said countries may receive more time to bring down deficits.

Rehn said that the European Commission will "take into account the specific challenges of each and every member state," and that a country may receive extra time to correct its deficit if it is carry out the necessary structural reforms to meet targets."

His statement at a meeting of the European Economic and Social Committee in Brussels, signalled an easing of deficit targets for countries such as Spain and France.

Spain has found another €4.0bn in financing after issuing three and nine-month bills in the sovereign debt market.

The Spanish Treasury has raised €885.7m with the issuance of three-month bills and a yield of 0.42%, slightly lower than the previous 0.44%. Demand improved with a bid-to-cover ratio of 5.75, compared to 4.18 in the previous auction.

Danone shares rally

Shares in Danone, the world's largest yoghurt maker, jumped to the most since October 2010 despite announcing plans to cut 900 jobs in Europe after 2012 profitability fell on weak consumption.

Drax advanced to the highest level since January after the power plant firm reported a 4.4% fall in annual underlying earnings and said it was investing significant capital to transform the business.

Bayer jumped after kicking off a Phase-3 trial of the Eylea injection, along with Regeneron Pharmaceuticals Inc.

Vodafone dropped after Bernstein downgraded its recommendation on the shares to underperform from perform.

Other asset classes mixed

The euro/dollar recovered from an earlier drop, rising 0.13% to the 1.0120 dollar mark.

Front month Brent crude futures fell by 0.419 dollars to the 116.870 dollar per barrel mark on the ICE.

RD

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