German Stocks Extend Gains After China’s Rate Cut
German stocks rose, completing their biggest two-day rally since April, after China cut interest rates, bolstering optimism that policy makers will increase their efforts to stimulate the global economy.
Commerzbank AG (CBK) led gains on the benchmark DAX Index (DAX) after China’s decision and amid reports the European Union may support Spanish lenders. Deutsche Boerse AG (DB1) rose after RBC Capital Markets advised buying shares in the operator of the Frankfurt stock exchange.
The DAX climbed 0.8 percent to 6,144.22 at the 5:30 p.m. close in Frankfurt. The gauge gained 2.1 percent yesterday after European Central Bank President Mario Draghi indicated the bank will act if the debt crisis worsens. The DAX has still tumbled 14 percent from its 2012 high on March 16 amid growing concern that Greece will have to leave the euro area. The broader HDAX Index rose 1 percent today.
“We need policy action right now,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Any reaction from central banks will be positive and a support in the short term, although markets will remain hostage to the European situation until we get more clarity and a solution on that front.”
China cut benchmark lending and deposit rates for the first time since 2008. The one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow. The one-year lending rate will fall to 6.31 percent from 6.56 percent.
European officials are working on a plan that would allow Spain to recapitalize its banks with aid from its European Union partners, Reuters reported, citing unidentified German officials.
Commerzbank, Deutsche Bank
Commerzbank jumped 5.7 percent to 1.43 euros. Deutsche Bank AG (DBK) climbed 1 percent to 28.69 euros.
Federal Reserve Vice Chairman Janet Yellen said yesterday slowing job growth and deteriorating financial-market conditions may warrant additional monetary stimulus in the U.S.
“If the authorities drop the ball, then we easily risk a repeat of 2008 and 2009,” said Jim Reid, a strategist at Deutsche Bank in London, wrote in a report. “However, if they act aggressively, we could see a decent two to three months for risk assets.”
Deutsche Boerse rose 2.1 percent to 38.96 euros, paring its decline in 2012 to 9.7 percent. The shares’ discount to its peers is “too extreme,” RBC wrote in a report, adding that the company may continue to pay between 7 percent and 10 percent of investors’ money in dividends or buybacks.
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