Bloomberg News

Most German Stocks Gain on Speculation of Spanish Bailout

November 13, 2012

Most German stocks rose, as the DAX Index erased losses in the final hour of trading amid speculation Spain will seek a second European Union-led bailout.

Deutsche Bank AG (DBK) led financial shares higher as yields on Spanish 10-year bonds reversed an earlier advance to the highest level in six weeks. EON AG, Germany’s biggest utility, plunged the most in at least two decades after lowering its earnings forecast for 2013. K+S AG (SDF) slid 4.5 percent, the most in 11 months, after predicting that 2012 sales and profit will only reach the bottom of a forecast range.

The DAX added less than 0.1 percent to 7,169.12 at the close of trading in Frankfurt as three shares increased for every two that fell. The gauge has rallied 20 percent from this year’s low on June 5 as the European Central Bank approved an unlimited bond-buying program and the U.S. Federal Reserve started a third round of asset purchases. The broader HDAX Index was also little changed today.

“There are rumors that a bailout for Spain is imminent and that has pushed bond yields down,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $77 million. “That explains the violent rebound in stocks.”

The DAX earlier declined as much as 1.3 percent as euro- area finance ministers failed to reach agreement with the International Monetary Fund on how Greece will repay its debt.

Greek Aid

Ministers meeting late yesterday put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the IMF will continue to contribute. IMF Managing Director Christine Lagarde took issue with a decision by the representatives of the 17-nation currency zone to postpone the goal of getting Greece’s debt down to 120 percent of GDP by two years, until 2022.

“The market is a little bit disappointed about the conference yesterday,” said Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank in Frankfurt. “One positive sign is that the finance ministers gave Greece another two years for their budget deficit, but all in all the market is very nervous about the situation.”

In addition to the speculation of a Spanish bailout request, German shares pared losses as Finance Minister Wolfgang Schaeuble said a plan to combine aid payments intended for Greece into a single package is being considered.

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein also said he’d be shocked if U.S. politicians failed to reach a deal to avoid the so-called fiscal cliff.

Fiscal Cliff

Congress begins meeting today in an attempt to reach a deal to prevent $607 billion of spending reductions and tax increases from coming into force early next year. President Barack Obama will meet with Republican and Democrat leaders from the House and Senate on Nov. 16.

Still, a measure of German investor confidence unexpectedly declined in November. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to minus 15.7 from minus 11.5 in October. Economists had forecast an increase to minus 10, according to the median of 43 estimates in a Bloomberg survey.

Deutsche Bank, Germany’s biggest lender, advanced 1.9 percent to 34.06 euros, erasing an earlier decline. Allianz SE (ALV), Europe’s biggest insurer, increased 1.1 percent to 95.04 euros.

Spanish 10-year bonds rose, leaving the yield on the securities four basis points lower at 5.85 percent. The yield earlier rose as much as seven basis points to 5.96 percent, the highest since Oct. 1.

BASF Gains

BASF SE (BAS) increased 1.6 percent to 64.09 euros, the largest gain in more than a month, as the world’s biggest maker of chemicals contributed the most to the DAX’s gains.

Nordex SE (NDX1) surged 5.3 percent to 3.10 euros as the German wind-turbine maker posted earnings before interest and taxes of 15.4 million euros.

EON tumbled 12 percent to 14.64 euros, the biggest decline since at least August 1992. The utility said its forecast of 3.2 billion euros to 3.7 billion euros of underlying net income next year “no longer seems achievable” because gas-fired power plants aren’t making money. EON said it will consider cutting dividend payments because of the “substantial economic uncertainties and structural changes in the energy industry.”

RWE AG (RWE), the nation’s second-largest utility, fell 1.2 percent to 32.93 euros.

K+S dropped 4.5 percent to 34.29 euros, its biggest decrease since Dec. 8, as Europe’s largest potash maker said that delayed Chinese and Indian contracts restrained market prices for fertilizer.

Earnings before interest and taxes excluding some hedging transactions, referred to as Ebit I, will be 820 million euros this year. The company had predicted earnings of as much as 900 million euros. Revenue will reach 3.9 billion euros, compared with an earlier forecast of as much as 4.2 billion euros.

Hochtief AG, Germany’s biggest builder, dropped 2.1 percent to 38.04 euros.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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