LONDON — The euro shot up to a two-month high against the dollar Friday after a closely-watched survey found German business confidence is running at its strongest level since reunification two decades ago, while stocks have been buoyed by solid earnings from General Electric.

GE, which is widely seen as a bellwether of U.S. economic conditions, reported that earnings rose 33 percent to 36 cents a share in the last three months of 2010, ahead of expectations of 33 cents. Investors were also cheered by the news that revenues were higher than expected at $41.38 billion and that impairments slid by $300 million.

GE's stellar results, which pushed the company's stock 5 percent higher, helped ease tensions over Bank of America, which reported a loss of $1.6 billion in the fourth quarter due to increased costs related to soured home loans.

"Earnings from GE far exceeding expectations and helping deflect attention from the chunky impairment charge lodged by Bank of America," said Ben Critchley, sales trader at IG Index.

In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 5,909.58 while Germany's DAX rose 0.7 percent to 7,076.79. The CAC-40 in France rose 1.5 percent to 4,025.51.

On Wall Street, the Dow Jones industrial average was up 0.5 percent at 11,875.17 soon after the open while the broader Standard & Poor's 500 index rose 0.5 percent to 1,286.78.

Sentiment in Europe and the U.S. had been fairly buoyant in the wake of an upbeat earnings statement from Google and news that German business confidence, as measured by the Ifo Institute's monthly survey, unexpectedly rose in January to its highest level since reunification about 20 years ago.

Sustained economic growth in the eurozone is considered one of the main requirements to reducing tensions over Europe's debt crisis, which has already seen Greece and Ireland get bailed out.

Expectations that EU officials are preparing a new, more comprehensive, approach to the debt crisis have supported sentiment this week, particularly in the currency markets. Governments are debating giving their €750 billion ($1 trillion) bailout fund broader powers, such as the ability to buy bonds on the market, which would help ease the pressure on fiscally weak countries like Portugal and Spain.

"Growing optimism surrounding the prospects for a long-lasting solution to the sovereign debt crisis troubling the eurozone continued to provide investors with reason enough to reverse bearish bets on the single currency," said Andrew Wilkinson, senior market analyst at Interactive Brokers.

By late afternoon London time, the euro was up 0.9 percent at a fresh two-month high of $1.3592.

Earlier in Asia, stocks were still shaken by fears that China will have to tighten monetary policy to cool its economy and get inflation down.

The previous day's news that China's economy grew by 9.8 percent in the fourth quarter and that inflation remained stubbornly high triggered worries that the world's second-largest economy — and the main driver of global economic growth in recent years — would force itself to slow down to control prices by raising bank interest rates or reserve requirements.

Japan's Nikkei 225 stock average lost 1.6 percent to close at 10,274.52, while Australia's S&P/ASX 200 dropped 0.6 percent. Hong Kong's Hang Seng fell 0.5 percent and South Korea's Kospi shed 1.7 percent.

Chinese shares — which took a beating Thursday — bucked the trend, with the benchmark Shanghai Composite up 1.4 percent to 2,715.29. The Shenzhen Composite Index for China's smaller, second market rose 0.7 percent to 1,178.16. New Zealand shares also rose.

Benchmark crude for March delivery was down 31 cents to $89.28 a barrel in electronic trading on the New York Mercantile Exchange.


Carlo Piovano in London and Pamela Sampson in Bangkok contributed to this report.