European shares jump on strong German data

Data showed German industrial production increased more than expected in February, driven by the construction industry

European shares jumped on Monday, led by cyclical stocks, after strong industrial production data from the region's biggest economy Germany, although there was a sense of caution ahead of this week's ECB's policy decision.

The STOXX 600 index ended 0.5% higher, with Germany's DAX slightly outperforming most of its regional peers with a 0.8% rise.

Data showed German industrial production increased more than expected in February, driven by the construction industry.

Cyclical sectors including automobiles and industrial goods and services advanced 1.3% and 0.8%, respectively, with basic resources adding 2% also supported by copper prices reaching a 14-month high.

However, analysts struck a cautious tone.

Today's figures give hope that the German economy did not contract again in the first quarter, wrote Commerzbank senior economist Ralph Solveen.

Nevertheless, a sustained recovery is not likely to set in until the second half of the year. This is also likely to be rather moderate, as it will receive little support from monetary policy and will be held back by the numerous structural problems, Solveen added.

Germany's 10-year government bond yield reached a two-and-a-half-week high ahead of the European Central Bank's interest rate decision on Thursday, as last week's strong U.S. jobs data prompted bets on fewer interest rate cuts this year.

With traders widely expecting the European Central Bank to stand pat on rates, they will scour for any clues that a first rate cut of 25 bps could be delivered in June.

The benchmark STOXX 600 on Friday hit its worst week since mid-January as U.S. policymakers talked down market expectations for imminent rate reductions - hopes around which have driven gains among most developed markets since late last year.

Further, a survey showed euro zone's investor morale improved for the sixth successive month in April to its highest level in over two years.