Bloomberg News

German Stocks Climb to 11-Week High Amid Debt-Plan Speculation

October 24, 2011

Oct. 24 (Bloomberg) -- German stocks rose to the highest in 11 weeks amid speculation euro-area leaders are edging closer to a plan to prevent the debt crisis from spreading.

Infineon Technologies AG and Aixtron AG led gains in technology shares. Volkswagen AG advanced 4.6 percent as analyst surveys showed the automaker may become the biggest in the world this year. Deutsche Telekom AG slipped 1.2 percent after a report that Europe’s biggest phone company will cut costs.

The DAX Index advanced 1.4 percent to 6,055.27 at the close in Frankfurt, the highest price since Aug. 5. The benchmark measure has surged 19 percent from this year’s low on Sept. 12 amid speculation that euro-area leaders will deliver a plan to shore up banks’ balance sheets and protect other economies from a possible Greek default. The broader HDAX Index gained 1.5 percent today.

Leaders at yesterday’s summit in Brussels ruled out tapping the European Central Bank’s balance sheet to boost the euro- region rescue fund, the European Financial Stability Facility, and excluded a forced restructuring of Greece’s debt. The politicians looked at strengthening the International Monetary Fund’s role and outlined plans to aid banks.

Complete Blueprint

The complete blueprint for the rescue fund won’t come together until a summit in two days. Like yesterday, it will start with all 27 European Union leaders before the 17 heads of the euro-area economies gather on their own.

“We need to be patient and sit tight waiting for Wednesday,” Michael Borre and Jakup Petur Baerentsen, chief equity advisers at Nordea Pension & Life in Copenhagen, said in a note to clients. “Markets may be very volatile, moving on rumors of how the final deal will look.”

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said talks on private sector involvement in a second aid package for Greece are focusing on losses of as much as 60 percent for bondholders.

“Private investors, the banks, the private sector, have to participate in quite a substantial way to ensure that Greece’s debt burden becomes bearable in the long term,” Juncker said Oct. 22 on RTL Luxembourg Television. “We said in July that it has to be 21 percent. This will clearly not be enough. It has to be considerably higher. About 50 percent, 60 percent, is what’s being talked about.”

Greek Losses

The world’s biggest banks are squabbling with European leaders over the size of losses on their Greek bonds, two people with knowledge of the discussions said. The Institute of International Finance, which represents the banks, proposed a loss of 40 percent on Greek debt, said one of the people, who declined to be identified because talks are confidential. That makes a compromise at 50 percent possible, the person said.

Infineon, Europe’s second-biggest chipmaker, and Aixtron, which makes equipment for the semiconductor industry, climbed 2.7 percent to 6.27 euros and 7.4 percent to 9.95 euros, respectively.

Oracle Corp., the world’s second-largest software maker, agreed to buy RightNow Technologies Inc. for $1.5 billion to add software that helps companies serve customers using call centers, the Internet and social networks.

Volkswagen rose 4.6 percent to 122.75 euros as Europe’s biggest automaker is poised to surpass Toyota Motor Corp. and General Motors Co. as the world’s largest carmaker in 2011.

VW Sales

The German company’s sales, third among carmakers in 2010, will probably rise 13 percent to 8.1 million vehicles this year, based on the average of three analysts surveyed by Bloomberg. GM sales will gain about 8 percent to 7.55 million, while Toyota will drop 9 percent to 7.27 million, according to the survey.

HeidelbergCement AG and ThyssenKrupp AG advanced 6 percent to 31.91 euros and 4.5 percent to 20.86 euros, respectively, as material stocks advanced the most of any of the 19 industry groups in the Stoxx Europe 600 index.

Deutsche Telekom fell 1.2 percent to 9.15 euros. The phone company plans to cut costs to help meet earnings targets as it fails to keep pace in acquiring new customers, WirtschaftsWoche magazine reported, citing an interview with executive board member Niek Jan van Damme.

--Editors: Andrew Rummer, Will Hadfield

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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