Bloomberg News

German Stocks Rise on Stimulus Optimism; Carmakers Gain

March 05, 2013

German stocks advanced amid speculation that central banks will continue stimulus measures and as China said it would raise its budget deficit to support consumer demand.

Deutsche Post AG gained the most in seven months as fourth- quarter earnings beat analysts’ estimates. RWE AG climbed to its highest level in seven weeks after saying it will sell its Dea oil and gas unit.

The DAX Index (DAX) increased 1.5 percent to 7,807.79 at 10:22 a.m. in Frankfurt. The gauge has added 2.6 percent so far this year as U.S. lawmakers agreed on a budget avoiding automatic fiscal changes that had threatened to push the world’s biggest economy into a recession. The broader HDAX Index rose 1.4 percent today.

“It seems that after the announcement of the Chinese government, the upwards trend received some new support,” Marcus Silbe, an analyst at Close Brothers Seydler Research AG in Frankfurt, wrote in an e-mail. “China promised deficit spending to meet its growth target this year of 7.5 percent. The banking sector got some tailwind after the announcement to relax the credit supply.”

China will raise its budget deficit by 50 percent this year as the central government cuts taxes and boosts measures to support consumer demand in the world’s second-biggest economy.

Kikuo Iwata, a nominee for Bank of Japan deputy governor, said the central bank should buy longer-term bonds to help it achieve a 2 percent inflation target.

Bond Buying

Federal Reserve Vice Chairman Janet Yellen said yesterday the U.S. central bank should press on with $85 billion in monthly bond buying. Yellen, the central bank’s No. 2 official, echoed Chairman Ben S. Bernanke’s comment last week that the benefits of the Fed’s historically low interest rates and near- record $3.09 trillion balance sheet outweigh any risk of financial instability.

“In the short-term, the hopes of stimulus are increasing confidence in the market,” Silbe said.

In the euro area, officials indicated that budget policies may be eased after a backlash against austerity plans. Economic strains may “justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic and Monetary Commissioner Olli Rehn told reporters late yesterday.

Deutsche Post AG gained 3.7 percent to 17.62 euros. Europe’s largest postal service said fourth-quarter earnings rose 38 percent and forecast profit to increase in 2013. Earnings before interest and taxes rose to 827 million euros ($1.08 billion) from 599 million euros a year earlier, the company said in a statement. Profit beat the 791.7 million-euro average of seven analyst estimates compiled by Bloomberg.

RWE Divests

RWE added 3.4 percent to 29.65 euros. Germany’s second- largest utility will divest its Dea oil and gas unit to cut capital spending. The sale will “take considerable pressure off future capital expenditure and therefore make an essential contribution to improving RWE’s financial headroom,” the Essen- based company said today in a statement.

RWE also reported a 0.8 percent decline in annual earnings. Recurrent net income dropped to 2.46 billion euros in 2012 from 2.48 billion euros a year earlier, missing the 2.51 billion-euro average estimate of 25 analysts surveyed by Bloomberg. Recurrent net, which is adjusted for exceptional items, is used to calculate the company’s dividend.

Banks Gain

Deutsche Bank AG, Germany’s largest lender, rose 2.7 percent to 34.05 euros. Exane BNP Paribas SA raised its recommendation on the shares to outperform, similar to a buy rating, from neutral. Commerzbank AG, the country’s second- biggest lender, climbed 1.6 percent to 1.42 euros.

Bayerische Motoren Werke AG advanced 2.8 percent to 71.31 euros. The largest maker of luxury cars said it sold more than 250,000 vehicles in January and February, an increase of 6 percent from a year earlier. It also forecast the global car market to grow by 4 percent this year.

Volkswagen AG, the world’s second-biggest carmaker, added 2.5 percent to 166.65 euros. Daimler AG, the third-largest maker of luxury cars, climbed 2.6 percent to 46.16 euros.

A gauge of auto-related stocks rose the most among the 19 industry groups in the Stoxx Europe 600 Index. (SXXP)

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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