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German business sentiment up, eastern headwinds loom

Germany's businesses grew more confident in April, the widely followed Ifo index showed on Thursday.

The Ifo business climate index came in at 111.2 points, better than forecast. This followed a fall to 110.7 in March, after four consecutive monthly increases.

Analysts in a Reuters poll had forecast a decline in April to 110.5.

Photographer | CNBC

The benchmark German Dax stock index traded around 0.7 percent higher at 9,612 points after the survey was out. German bunds, which are viewed as a "safe-haven" asset likes U.S. Treasurys, fell, with benchmark 10-year Bunds yielding 1.55 percent.

Carsten Brzeski of ING warned against "hard-headed optimism" regarding the German economy.

"Despite today's surprisingly strong Ifo and the expected growth acceleration of the German economy in the first quarter, it would be foolish to turn a blind eye to possible downside risks for the economy," he said in a research note published after the survey was out.

"With the Ukraine crisis, Chinese uncertainties and emerging markets slowing down, more and more gusts of wind, particularly from the East, could easily disturb the current spring fever on the euro zone's island of happiness."

The Ifo survey is published by the Munich-based Ifo think-thank and is viewed as a strong leading indicator of the German economy.

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