By ANDREA TRYPHONIDES And SARA SJOLIN

European stocks jumped and the euro nudged higher against the dollar following improved data on the German economy, while Danone (BN.FR) SA's turnaround plans sent the shares soaring 5.9%.

The Stoxx Europe 600 index closed up 1.1% at 290.01, ending a three-session losing streak and reaching its highest close since Jan. 29.

Data from the Center for European Economic Research showed economic expectations in Germany reaching their highest point in nearly three years. The economic expectations index climbed to 48.2, beating a forecast of 35.0 and a reading of 31.5 in January. That marked the highest level since April 2010 and the third consecutive monthly increase.

"The fact that the index is now firmly in positive territory means that a large majority of investors see economic conditions improving in the next six months," said Jennifer McKeown, senior European economist at Capital Economics, in a note. "But there are a few caveats. First, the index has never been well correlated with GDP growth and we will await February's business surveys for stronger evidence of a recovery."

The euro climbed to $1.3390 in early afternoon U.S. trade from $1.3351 late Monday.

The U.K.'s FTSE 100 gained 1% to 6379.07, its highest close of the year. Germany's DAX climbed 1.6% to 7752.45, and France's CAC-40 jumped 1.9% to 3735.82.

Food-and-beverage shares were strong following well-received 2012 results from Danone. The company reported a better-than-expected rise of 8% in total group sales for 2012 and announced plans to cut around 900 jobs across Europe over the next two years to combat the deterioration in overall consumer demand.

Sanofi (SAN.FR) gained 2.6% in Paris after the drug maker said the U.S. Food and Drug Administration has accepted to review an application for the diabetes drug lixisenatide.

In bond markets, a well-received Spanish debt auction helped Spanish and Italian bond yields edge lower. Spain's Treasury sold the maximum targeted €4 billion ($5.34 billion) of three- and nine-month bills. The focus will turn increasingly to Italy in coming days as the country heads to the polls for the general election Sunday.

Write to Andrea Tryphonides at andrea.tryphonides@dowjones.com