Bloomberg News

German Stocks Advance as Bundesbank Sees Economic Growth

February 18, 2013

German stocks advanced, rebounding after the longest streak of weekly declines since April, as the country’s central bank said Europe’s largest economy will return to growth this quarter.

Deutsche Lufthansa AG rose 1.7 percent after Deutsche Bank AG recommended shares in the airline. Kabel Deutschland Holding AG surged to a record as a person familiar with the situation said a takeover approach from Vodafone Group Plc may come as soon as this week.

The DAX Index added 0.5 percent to 7,628.73 at the close in Frankfurt as U.S. markets were shut for the Presidents’ Day holiday. The benchmark gauge retreated for three straight weeks through Feb. 15, bringing its annual drop to 0.3 percent. The broader HDAX Index advanced 0.4 percent today.

“Earnings season is now in full swing in Europe, and it doesn’t look too bad given the macro environment was so weak in the fourth quarter,” Michael Kapler, an equities portfolio manager at Mittelbrandenburgische Sparkasse in Potsdam, Germany, said in a phone interview. “Investors will then focus on elections coming up and important macro data we have ahead as the recovery is still not very strong.”

Some 53 percent of western European companies reporting results since Jan. 8 have topped analysts’ estimates for profit, according to data compiled by Bloomberg, while 52 percent have beaten revenue projections.

Volume Declines

The number of shares changing hands on the DAX was 32 percent less than the average of the past 30 days, according to data compiled by Bloomberg.

The German economy will return to growth in the current quarter as industrial production rebounds, the Bundesbank said said in its monthly report today. Gross domestic product contracted 0.6 percent in the final three months of 2012.

“The economic outlook for Germany has improved relatively quickly and in remarkable fashion in the past three months,” the Frankfurt-based central bank said. “For the first quarter of 2013, an expansion of overall economic output can be expected from today’s perspective.”

The European Central Bank will assess whether the recent appreciation of the euro has changed the inflation outlook in its new economic projections next month, President Mario Draghi said at a quarterly hearing at the European Parliament in Brussels today. The ECB currently predicts inflation will average 1.6 percent this year and 1.4 percent in 2014.

In Italy, Silvio Berlusconi started the week with a rally today in Milan, capital of the battleground region of Lombardy, before the nation’s election on Feb. 24-25.

Italian Polls

Front-runner Pier Luigi Bersani, had 33.8 percent support in an SWG Institute survey published Feb. 8, the day before Italy’s two-week polling blackout began. That compared with 27.8 percent for former premier Berlusconi.

“Political risk is potentially reasserting itself in the short term,” Kevin Lilley, a fund manager at Old Mutual Asset Managers U.K. in London, said in a Bloomberg Television interview with Mark Barton. “It’s clear that the Italian election is going to be a lot closer to call. The market would not like a Berlusconi government in any way, shape or form. Italian bond yields would go up, and that would destabilize the equity markets.”

Lufthansa rose 26 cents to 15.70 euros after Deutsche Bank upgraded its recommendation on the stock to buy from hold. The carrier’s cost savings and earnings targets make its restructuring efforts more credible than past programs, analysts led by Michael Kuhn wrote in a report.

Kabel Deutschland

Kabel Deutschland gained 4.1 percent to 71.25 euros, the highest price since its March 2010 initial public offering. Vodafone may approach Germany’s largest cable provider about a potential takeover bid as early as this week, according to a person familiar with the matter. Vodafone is waiting for Kabel Deutschland’s earnings release, scheduled for Feb. 20, before initiating negotiations, said the person.

Kabel Deutschland rallied 7.2 percent last week after a person familiar with the matter said Vodafone, the world’s second-largest wireless carrier, is considering a takeover bid.

RWE AG, Germany’s second-largest utility, gained 3.4 percent to 28.27 euros, its biggest jump in six months. Prague- based Energeticky & Prumyslovy Holding AG will bid for RWE’s Czech unit, Net4Gas, EPH spokesman Daniel Castvaj said, without elaborating on the offer.

Beiersdorf AG, the maker of Nivea skin cream, dropped 2.3 percent to 64.30 euros, the biggest decline in almost seven months. Ellen-Brigitta Heidenreich, the wife of Chief Executive Officer Stefan Heidenreich, sold 6.8 million euros ($9.1 million) worth of shares on Feb. 15, the company said in a statement today.

Aixtron SE retreated 2.4 percent to 9.35 euros. The maker of equipment for the semiconductor industry said CEO Paul Hyland will step down on Feb. 28, after holding the position since December 2010.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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


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