Bloomberg News

German Stocks Rally to Highest Level Since January 2008

December 06, 2012

German stocks rallied to their highest level since January 2008 amid optimism that Republicans will agree to higher taxes as part of a new U.S. budget, and as factory orders in Europe’s biggest economy surged in October.

Bayer AG (BAYN) rose 3.4 percent as Germany’s largest drugmaker sought permission to use one of its medicines to treat a new eye condition. Beiersdorf AG (BEI) gained 2 percent as the maker of Nivea skin cream raised its full-year sales forecast for the second time in little more than a month.

The DAX Index (DAX) climbed 1.1 percent to 7,534.54 at the close of trade in Frankfurt, its highest level since Jan. 15 2008. The equity benchmark has rallied 26 percent from this year’s low on June 5 as the European Central Bank approved an unlimited bond- buying program and euro-area finance ministers eased the terms of bailout loans to Greece. The broader HDAX Index jumped 1.2 percent today.

“Progress in the negotiations between Republicans and Democrats in the U.S. has helped the market to reach a new year high,” Soeren Steinert, who helps manage about $22 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, wrote in a message. “Volumes are not high. Therefore, the market move right now is not supported by a broad mass.”

The volume of shares changing hands in shares listed on the DAX was 9.5 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

Budget Negotiations

In the U.S., some Republicans have signaled they will accept President Barack Obama’s proposal to increase taxes on higher earners. More than $600 billion of additional taxes and spending cuts will come into force at the beginning of next year unless politicians can agree on a new federal budget.

Republican House Speaker John Boehner proposed a $2.2 trillion plan this week to raise revenue by limiting tax deductions, a measure that would mostly affect high earners. He insisted he won’t agree to higher tax rates at any income level.

German factory orders jumped in October at almost four times the pace that economists had forecast. Orders, adjusted for seasonal swings and inflation, surged 3.9 percent from September, the Economy Ministry in Berlin said today. It revised September’s drop to 2.4 percent from 3.3 percent. The increase in October exceeded the median forecast for a 1 percent gain in a Bloomberg News survey of 42 economists.

ECB Forecasts

ECB President Mario Draghi said today that economic weakness will persist into next year.

“Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary- policy stance and significantly improved financial market confidence work their way through to the economy,” he said at a press conference in Frankfurt.

The central bank also left its benchmark interest rate unchanged at a record low of 0.75 percent.

“Relatively clearer policy in Europe compared with the U.S. is leading to an outperformance in European stocks,” Daniel Weston, a portfolio manager at Aimed Capital Management LLC in Munich, said in a message.

Bayer gained 3.4 percent to 72.54 euros as the drugmaker applied for approval to sell its medicine Eylea as a treatment for macular edema degeneration. European doctors already use the drug for a different eye disorder.

Beiersdorf rose 2 percent to 61.73 euros after saying revenue at its consumer business will grow more quickly than estimated. Sales will rise more than 4 percent this year, the Hamburg-based company said today. Beiersdorf had predicted growth of about 3 percent. On Nov. 2, it increased the forecast to between 3 percent and 4 percent.

ThyssenKrupp, Daimler

ThyssenKrupp AG (TKA) added 2.3 percent to 16.43 euros as Germany’s largest steelmaker ousted three top executives in an attempt to repair a boardroom tainted by corruption allegations and an unsuccessful expansion in the Americas.

Salzgitter AG (SZG), the country’s second-biggest steelmaker, added 1.7 percent to 37.49 euros. Kloeckner & Co. SE, Europe’s largest independent steel trader, jumped 6.1 percent to 8.97 euros. A gauge of commodity companies posted the second-biggest gain of the 19 industry groups in the Stoxx Europe 600 Index.

Daimler AG (DAI) gained 1.2 percent to 38.65 euros after the world’s third-largest maker of luxury vehicles sold a 7.5 percent stake in European Aeronautic, Defence & Space Co. (EAD), valued at 1.66 billion euros ($2.2 billion). Daimler will sell part of its remaining 7.5 percent stake after a lock-up period of 180 days from the end of the sale of the first tranche.

Continental, Kuka

Continental AG (CON) rose 1.3 percent to 85.89 euros as the Economic Times reported that Europe’s second-largest auto-parts maker will invest 7.15 billion rupees ($132 million) in India. The company will invest the money over the next three years, CEO Elmar Degenhart was quoted as saying in the report.

Kuka AG (KU2), Europe’s largest maker of industrial robots, surged 4.7 percent to 27.75 euros as Morgan Stanley initiated coverage of the stock with an overweight rating, forecasting a target price of 30 euros on the shares.

RWE AG (RWE) fell 1.4 percent to 31.79 euros. A gauge of utilities companies posted the only decline of the 19 industry groups in the Stoxx Europe 600 Index (SXXP) as GDF Suez SA tumbled after forecasting that earnings will drop next year.

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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