Nov. 5 (Bloomberg) -- German stocks advanced for a second day after U.S. jobless claims and worker productivity beat forecasts and earnings at Deutsche Telekom AG topped estimates.

Deutsche Telekom, Europe’s biggest telephone company, climbed 2.3 percent as it posted a 7.2 percent increase in third-quarter profit, aided by cost cuts, and confirming its 2009 targets. Software AG, Germany’s second-largest software maker, surged 8.2 percent after raising full-year targets for revenue and profit margins.

The benchmark DAX Index added 0.7 percent to 5,480.92. The measure has soared 49 percent since March 6 amid signs that government stimulus policies and record-low interest rates are helping to drag the global economy out of recession.

“Tomorrow sees the release of the all important jobs report in the U.S.,” said James Hughes, market analyst at CMC Markets in London. Today’s data “take on added importance when everyone looks for an improvement in the employment numbers.”

Initial claims for unemployment benefits dropped to 512,000 last week and worker productivity surged at the fastest pace in six years, reports showed today. The U.S. government is projected to report that payrolls fell by 175,000 workers last month, less than the 263,000 lost the previous month, according to the median of estimates in a Bloomberg News survey before tomorrow’s Labor Department figures.

U.S. Federal Reserve officials said yesterday they will keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.

Interest Rates

The European Central Bank and Bank of England today kept their benchmark interest rates at record lows of 1 percent and 0.5 percent, respectively.

Deutsche Telekom climbed 2.3 percent to 9.50 euros. Citigroup Inc. raised its recommendation on the stock to “buy” from “hold” after the earnings release.

Software AG gained 8.2 percent to 67.01 euros. Full-year revenue will be 835 million euros ($1.24 billion) to 845 million euros in 2009 with a margin on earnings before interest and tax of between 25 percent and 25.5 percent, the company said today. It previously forecast an Ebit margin as low as 24.5 percent, and sales growth between 4 percent and 8 percent for total revenue of as much as 778.33 million euros.

Retail Shares

Retailers across Europe got a boost after Delhaize Group reported profit that topped analysts’ estimates and raised its forecast for this year. Metro AG added 3.3 percent to 40.93 euros, the steepest rise among shares in the DAX.

Gains in the index were limited by earnings from Munich Re that missed estimates and as Commerzbank AG said it needs to set aside more money for bad loans.

Munich Re, the world’s largest reinsurer, fell 1.1 percent to 106.20 euros after reporting a third-quarter profit of 644 million euros ($955 million) on higher investment income and lower claims from major natural catastrophes.

Commerzbank sank 4.7 percent to 6.87 euros. Germany’s second-biggest lender posted a third-quarter net loss of 1.05 billion euros earlier this week on costs tied to the integration of Dresdner Bank and writedowns stemming from its Eurohypo commercial-property unit. The bank said today loan-loss provisions totaled 1.05 billion euros in the period, exceeding analysts’ estimates.

SGL Carbon SE tumbled 7.9 percent to 23.70 euros as third- quarter pretax profit and sales slumped at the world’s largest maker of carbon and graphite products. ProSiebenSat.1 Media AG sank 9.4 percent to 7.16 euros after Germany’s biggest private broadcaster said its third-quarter loss widened.

Draegerwerk AG rallied 4.9 percent to 29.90 euros after the maker of medical equipment said third-quarter net income rose to 3.7 million euros from 1.8 million euros.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

Last Updated: November 5, 2009 11:50 EST