Bloomberg News

German Stocks Climb on Backing for Bailout Fund, U.S. Economy

September 29, 2011

Sept. 29 (Bloomberg) -- German stocks rose after lawmakers backed an extended euro-region bailout fund and U.S. reports showed the economy grew faster than previously estimated in the second quarter and claims for unemployment benefits fell.

Commerzbank AG and Deutsche Bank AG led rising shares in the benchmark DAX Index. Balda AG sank 5.6 percent after Handelsblatt said the maker of plastic components fraudulently obtained subsidies of several million euros from Chinese authorities, citing a former Balda manager.

The DAX Index added 1.1 percent to 5,639.58 at the 5:30 p.m. close in Frankfurt, erasing earlier losses of 0.8 percent. The gauge has still slumped 25 percent since this year’s high on May 2 amid concern global economic growth is slowing and policy makers are struggling to contain the European debt crisis. The broader HDAX Index advanced 1 percent today.

“Europe is showing glimmers of hope for political certainty,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich. “U.S. data is providing a positive surprise to support a bounce in stocks.”

A U.S. report today showed a revised 1.3 percent rise in gross domestic product compared with a 1 percent gain previously calculated. The median forecast of economists surveyed by Bloomberg News was 1.2 percent, following a 0.4 percent increase in the first three months of the year.

Jobless Data

Applications for jobless benefits dropped by 37,000 in the week ended Sept. 24 to 391,000, the fewest since April, Labor Department figures showed. Economists forecast 420,000 claims, according to the median estimate in a Bloomberg News survey.

A separate report showed the number of people out of work in Germany fell a seasonally adjusted 26,000 to 2.92 million in September, the Nuremberg-based Federal Labor Agency said today. Economists had forecast a drop of 8,000, according to a median estimate of 24 estimates in a Bloomberg News survey. The adjusted jobless rate slipped to 6.9 percent from 7 percent in the previous month.

Germany’s Bundestag passed a law giving more firepower to the European Financial Stability Facility with 523 votes in favor and 85 against, granting it powers to buy bonds in secondary markets, enable bank recapitalization and offer precautionary credit lines. It raises Germany’s guarantees to 211 billion euros ($287 billion) from 123 billion euros.

German Banks

Deutsche Bank, Germany’s biggest bank, climbed 3.9 percent to 28.25 euros, while Commerzbank, the country’s second-biggest bank, surged 4.7 percent to 2.01 euros. Allianz SE, Europe’s biggest insurer, surged 4 percent to 72.50 euros. Banking and insurance shares were the best performers in the benchmark Stoxx Europe 600 Index today, both climbing 2.5 percent.

Deutsche Lufthansa AG, Europe’s second-largest airline, rose 2.5 percent to 10.11 euros. The German government said the introduction of an emissions-trading system should be delayed if a “competitively neutral” solution cannot be found for European airlines, Frankfurter Allgemeine Zeitung reported, citing a letter from Angela Merkel’s Chief of Staff Ronald Pofalla to the association for the German air industry.

Balda plummeted 5.6 percent to 5.52 euros, the lowest since November, after Handelsblatt newspaper said the company obtained subsidy by feigning a factory that did not exist and by paying taxes for products that were never made.

Balda said its Chinese unit BTO conducted itself in a correct and lawful manner and was entitled to subsidy payments. The company rejecting the report by Handelsblatt, saying BTO received total subsidies of 200,000 euros in 2010, not 6.2 million euros as reported by the Handelsblatt.

Vossloh AG slumped 9.8 percent to 76.62 euros, the biggest drop in almost two years, after cutting its sales forecast for the current year to about 1.2 billion euros and earnings before interest and tax of 90 million euros to 100 million euros. The company had previously seen sales of 1.25 billion euros and Ebit of 120 million euros to 130 million euros.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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