Bloomberg News

German Stocks Rise on Optimism Europe Will Expand Rescue Fund

October 19, 2011

Oct. 19 (Bloomberg) -- German stocks rose for a second day, led by banks, following conflicting reports that Europe’s biggest economies have reached a deal to enhance a rescue fund for the region.

Deutsche Bank AG and Commerzbank AG gained more than 4 percent as the Guardian reported Germany and France have agreed to boost the European Financial Stability Facility to 2 trillion euros ($2.8 trillion) from 440 billion euros. Software AG jumped 12 percent after reiterating its full-year sales target.

The benchmark DAX Index increased 0.6 percent to 5,913.53 at the close in Frankfurt. The gauge climbed in the last three weeks as policy makers said they were working on a plan to end the sovereign debt crisis. Even so, the DAX has tumbled 21 percent from this year’s high on May 2. The broader HDAX Index added 0.5 percent today.

“The financial industry is in the positive and underpinning gains in the DAX on the back of hopes that policy makers will eventually help the whole market,” said Stefan Chmielewski, a trader at Lang & Schwarz Wertpapierhandelsbank AG in Dusseldorf.

The Standard & Poor’s 500 Index in the U.S. yesterday extended gains in the last hour of trading, rallying to the highest level since Aug. 3, following the Guardian report.

Conflicting Reports

France and Germany are still working on how to increase the effective power of the rescue fund, a person with direct knowledge of the talks told Bloomberg News.

German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that the EFSF’s firepower may be increased to a maximum of 1 trillion euros through an insurance model, Financial Times Deutschland said.

A U.S. Commerce Department report showed that housing starts in the world’s largest economy increased more than forecast in September.

Builders began work on 658,000 houses at an annual rate, up 15 percent from August and the most since April 2010, data showed. The median forecast in a Bloomberg News survey called for a 590,000 pace. Multifamily home starts surged to the highest since October 2008.

Banks Rally

Financial shares led the gains. Deutsche Bank, the nation’s largest bank, rose 4.2 percent to 27.53 euros. Smaller rival Commerzbank gained 4.7 percent to 1.63 euros. Allianz SE, Europe’s largest insurer, climbed 4.3 percent to 79.26 euros. Munich Re, the world’s biggest reinsurer, added 1.4 percent to 97.15 euros.

Software AG surged 12 percent to 30.45 euros. Germany’s second-largest maker of business software confirmed its full- year sales target after third-quarter earnings rose. Operating profit advanced to as much as 73 million euros from 69.1 million euros a year earlier, the company said in a statement.

Suess MicroTec AG, a maker of semiconductor equipment, jumped 9 percent to 7.17 euros. The company, along with a partner, won an order for the newest generation of its products from an unidentified integrated device maker, Suess said.

ProSiebenSat.1 Media AG, Germany’s biggest private broadcaster, rose 1.1 percent to 14.64 euros. The company was rated “buy” in new coverage at Jefferies Group Inc., which estimated the shares may reach 17 euros.

Hochtief AG rallied 3.7 percent to 52.98 euros after Goldman Sachs Group Inc. raised its recommendation for the construction company to “conviction buy” from “neutral.”

“Despite a history of volatile construction margins, new management is addressing profitability,” Goldman wrote in a report to investors. The “influence” of majority stakeholder Actividades de Construccion y Servicios SA of Spain “could lead to improvement in best practice and enhanced bidding opportunities.”

--With assistance from Corinne Gretler in Zurich. Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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


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