MANNHEIM, Germany, Feb 19 (Reuters) - German analyst and

investor sentiment soared to its highest level since April 2010,

beating all expectations with a third successive increase and

signalling that financial markets are confident Europe's largest

economy has turned a corner.

The Mannheim-based ZEW think tank said on Tuesday its

monthly poll of economic sentiment rose to 48.2 points from 31.5

in January, beating even the highest expectation in a Reuters

poll with a median forecast for 35.0 points.

The index was based on a survey of 272 analysts and

investors conducted between Feb. 4 and 18, ZEW said.

MARKET REACTION

The better-than-expected reading boosted the euro and

European shares and sent German Bund futures lower.

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ECONOMISTS

JENNIFER MCKEOWN, CAPITAL ECONOMICS:

'The fact that the index is now firmly in positive territory

means that a large majority of investors see economic conditions

improving in the next six months. But there are a few caveats.

First, the index has never been well correlated with GDP

growth and we will await February's business surveys for

stronger evidence of a recovery.

Second, given the weak starting point of a 0.6% quarterly

fall in GDP in Q4, it is hardly surprising that investors now

see conditions improving - anything else would be deeply

worrying. And third, the recent improvement might relate partly

to the ECB's hints of further policy support and signs of

progress in the euro-zone's periphery (including the Irish bank

debt deal).

With Mr Draghi's words yet to be followed up with actions

and political risks in Italy growing, we fear that investor

sentiment might weaken again before long.'

THOMAS GITZEL, VP BANK:

'The number of people who are optimistic about growth has

clearly grown, as shown by the expectations component of the

ZEW. The rising optimism among analysts is linked to the debt

crisis abating.

'But in the context of a surprisingly clear slowdown in the

economy all that remains is to hope for a quick return to

growth.'

RALF UMLAUF, HELABA

'The numbers are gratifying, especially as the positive

consensus estimate was clearly exceeded again. For sure the

decline in the current conditions is disappointing, but the mean

value from both components provides a very benign indicator for

the Ifo business climate which is to be published on Friday.

'Expectations of an economic recovery after the weak final

quarter of 2012 are underpinned. Germany should in this respect

be able to avoid a recession.'

BACKGROUND

* For a story on Germany's Bundesbank seeing some German

growth in Q1 and a pick-up in the pace later this year, click on

* For a story on Germany's economy shrinking the most since

the 2009 financial crisis, click on

* For a story on German firms being optimistic on exports

despite a strong euro, click on

* For a story on Germany's Economy Ministry saying the

German economy will gradually regain momentum this year, click

on

* For a story on Germany's trade surplus soaring, click on

* For a story on manufacturing pushing German industry

output slightly up in December, click on

* For a story on euro zone demand pushing German industry

orders higher, click on

* For a story on Germany's private sector expanding at its

fastest rate since June 2011, click on

* For a story on German manufacturing suggesting a return to

economic growth, click on

* For a story on German retail sales plunging in December,

click on

* For a story on German unemployment falling in January,

click on

(Reporting by Berlin bureau)

Keywords: GERMANY ZEW/

(gareth.jones@thomsonreuters.com)(+49 30 2888 5223)(Reuters Messaging: gareth.jones.thomsonreuters.com@reuters.net)

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