Europe stocks gain after German morale jump

By Nigel Stephenson

LONDON (Reuters) - European shares and the euro got a boost on Monday after German business morale unexpectedly rose in February, lifting investors out of a funk caused by a fall in Chinese home prices.

In Ukraine, where Moscow-backed Viktor Yanukovich was ousted from the presidency, the country's dollar bonds rallied and the hryvnia currency fell, though there was scant impact on developed markets.

German Bund futures fell to the day's low after the Ifo business climate index in Europe's powerhouse economy rose to 111.3 from 110.6 last month, adding to the recent optimism over the economic recovery in the euro zone.

The euro edged up to $1.3769 after the data.

Earlier, shares in Asia fell and the Japanese yen rose as growth in Chinese home prices eased for the first time in 14 months - a sign Beijing's campaign to tighten credit conditions may be starting to bite.

The FTSEurofirst 300 index of top European stocks was up 0.13 percent, although a disappointing outlook from German carmaker Volkswagen limited gains.

Asian shares excluding Japan fell 0.4 percent and most Asian emerging markets currencies were lower. Tokyo's Nikkei index fell 0.2 percent as the yen, which is often sought in times of market stress, strengthened.

"Dollar-yen moves on risk aversion, and when Tokyo stocks are down dollar-yen is down, even if the reason is a drop-off in activity in its (Japan's) major export market," said Marshall Gittler, head of global FX strategy at IronFX Global.

Spanish government bond yields fell, approaching recent eight-year lows after Moody's raised Spain's credit rating in a further endorsement of Madrid's efforts to revive an economy once at the sharp end of the euro zone debt crisis.

Moody's upgraded by one notch to Baa2 with a positive outlook. Spain's 10-year government bond yields last traded 2.6 basis points lower at 3.53 percent.

"It's certainly reinforcing positive sentiment in Spain. Moody's has recognised not only the economic recovery but also the structural reforms ... and the fact that they're sticking to their guns on the fiscal deficit," said Nick Stamenkovic, bond strategist at RIA Capital Markets in Edinburgh.

The yen was up 0.1 percent at 102.37 to the dollar and slightly stronger versus the euro.

China shares sank to a two-week low, dragging Hong Kong markets down, as property and banking counters slipped on mainland news reports that stoked fears banks have stopped extending loans to property-related companies.

"I would get out of interest rate-sensitive sectors. It's very hard to navigate right now with policy risk on the rise," said Hong Hao, Hong Kong-based chief equity strategist at Bank of Communication International.

Data on Monday showed the pace of the rise in Chinese home prices slowed in January for the first time in 14 months, suggesting the government's efforts to cool the market were having an effect.

YUAN FALLS

The Chinese yuan fell, extending its worst weekly performance in more than two years after the People's Bank of China set its daily midpoint lower for a fifth session.

On Wall Street on Friday, stocks were off slightly on options-related expirations.

Group of 20 finance ministers and central bankers committed to spurring faster global growth at a two-day meeting in Sydney over the weekend.

The final communique said the G20 would increase investment and employment, generating more than $2 trillion in additional output over five years while creating tens of million of new jobs.

On the commodities front, Brent crude added about 0.2 percent to $110.01 a barrel. Gold added about 0.2 percent to $1,330.80 an ounce after it marked a third straight week of gains.

(Additional reporting by Marius Zaharia and Laurence Fletcher in London, Blaise Robinson in Paris and Lisa Twaronite in Tokyo; Editing by John Stonestreet)