Bloomberg News

German Stocks Rise as ECB Extends Refinancing

June 06, 2012

German stocks advanced the most in seven weeks as the European Central Bank extended its short-term refinancing facility and said officials stand ready to act as the euro-area’s economic outlook worsens.

Deutsche Lufthansa AG, Germany’s largest airline, gained 2.6 percent after a report said its catering business may receive acquisition interest. Centrotherm Photovoltaics AG (CTN), the German maker of machines for the solar industry, fell 1 percent to 5.57 euros.

The DAX Index (DAX) rose 2.1 percent to 6,093.99 at the close in Frankfurt, after ECB President Mario Draghi refrained from cutting the benchmark interest rate or announcing a fresh round of three-year loans. The DAX has still tumbled 15 percent from its 2012 high on March 16 on growing concern that Greece may be forced to leave the euro currency union. The broader HDAX Index climbed 2.2 percent.

“Markets are fixated on the ECB’s response to dealing with the market environment,” said Jeremy Batstone-Carr, head of research at Charles Stanley & Co. in London. “There has also been speculation of further unconventional policy measures from the Federal Reserve.”

Draghi said officials will extend their offerings of unlimited cash until the start of 2013 for periods of up to three months.

“We have decided to continue our main refinancing at fixed rate, full allotment for as long as necessary” and at least until January, Draghi told reporters in Frankfurt today.

Debt Sharing Plan

German Chancellor Angela Merkel’s council of economic advisers is reworking proposals on debt sharing in the euro region in a bid to address government concerns over the plan, said council member Lars Feld.

“I see some movement in the government” favorable to the council’s proposal for a European redemption fund since the proposed amendments were aired, said Feld, a professor of economics at Freiburg University. The five-member council, backed by opposition parties, is now canvassing government ministries on the proposals for the fund, he said.

The ECB today left its benchmark interest rate at 1 percent. Draghi also said today that the economy faces “increased downside risks.”

The Group of Seven nations yesterday agreed to coordinate their response to the euro-area crisis.

Germany sold 3.98 billion euros of five-year government notes at a yield of 0.41 percent, the lowest on record, the Bundesbank said today. The government received bids for 6.2 billion euros, compared with a maximum sales target of 5 billion euros.

Manufacturing Slides

A report showed German industrial output fell more than economists forecast in April. Production declined 2.2 percent from March, when it rose a revised 2.2 percent, the Economy Ministry in Berlin said today. Economists in a Bloomberg survey forecast a drop of 1 percent.

Deutsche Lufthansa AG (LHA) gained 2.6 percent to 8.27 euros. Do & Co Restaurants & Catering AG may look at Lufthansa’s catering unit LSG Sky Chefs if it’s invited, Austrian daily Der Standard reported, citing Chief Executive Officer Attila Dogudan.

HeidelbergCement, which derives almost a fourth of its revenue from North America, rose 4.8 percent to 33.92 euros.

Deutsche Boerse AG (DB1) advanced 4.4 percent to 38.18 euros.

Centrotherm Photovoltaics fell 1 percent to 5.57 euros, after Deutsche Boerse said the stock will be removed from the TecDax Index, to be replaced by Cancom, an IT services provider.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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


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