German business morale improved unexpectedly in October, hitting its highest level in 2 and half years. Experts say that suggests that executives have become more optimistic.

Tuesday's strong business climate index from the Ifo economic institute boosts hopes that an expected slowdown of the German economy could be less severe than thought.

The data also helped Germany's DAX index touch a new 2016 peak. The surprisingly strong rise in the index was driven by improved sentiment in the manufacturing and construction sectors. That came as the business climate in wholesaling and retailing worsened slightly.