German stocks rebounded from their lowest level in two months as banks rallied.
Deutsche Bank AG (DBK) and Commerzbank AG (CBK), the nation’s two largest lenders, rose more than 2 percent after HSBC Holdings Plc’s equity strategists recommended buying European banks. ThyssenKrupp AG (TKA), Germany’s biggest steelmaker, gained 1.4 percent after Alcoa Inc. (AA:US) of the U.S. reported an unexpected first-quarter profit.
The DAX Index climbed 68.3, or 1 percent, to 6,674.73 at the close in Frankfurt. The gauge slumped 2.5 percent yesterday to its lowest level since Jan. 31 after a report showed that U.S. employers added fewer jobs in March than forecast and Spanish and Italian bond yields surged. The DAX has still rallied 13 percent this year. The broader HDAX Index also rose 1 percent today, paring yesterday’s 2.5 percent plunge.
“Survey-based sentiment is now supportive of equities,” Bernd Meyer, the Frankfurt-based head of cross asset-class strategy at Commerzbank, wrote in a report. “Macro data will be the key determinant of whether something more than a temporary disruption can be avoided,” following recent declines in equities, he wrote.
The volume of shares changing hands on the DAX (DAX) was 0.1 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
Deutsche Bank advanced 2.3 percent to 34.48 euros. Commerzbank climbed 4.1 percent to 1.72 euros. HSBC strategists Peter Sullivan, Robert Parkes and Garry Evans raised their recommendation on European banks to overweight from neutral, meaning that investors should buy the shares. The strategists said that the deterioration in lenders’ earnings since 2007 may have bottomed.
‘Reassessment of Banks’
“Signs that earnings are bottoming could spark a reassessment of the banks sector which has been in a value trap for years,” the strategists wrote. “A case can be made for over 50 percent upside on the assumption that price will equal tangible book value. We stress that this is a long-term equilibrium valuation and there is a catalog of risks that explain why valuations are currently depressed.”
The Stoxx 600 Banks Index (SX7P) of European lenders trades at 0.6 times the value of its members’ assets, or book value, according to data compiled by Bloomberg.
ThyssenKrupp (TKA) rose 1.4 percent to 17.62 euros. Alcoa, the largest U.S. aluminum producer, reported after markets closed yesterday a first-quarter profit (AA:US) of 9 cents a share after customers from automakers to beverage-can manufacturers ordered more of the metal. It posted earnings excluding restructuring costs and other items of 10 cents a share, compared with the 4- cent loss that was the average estimate (AA:US) in a Bloomberg poll.
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