German Stocks Rise on U.S. Fiscal Cliff Budget Optimism

German stocks advanced for a third day, with the DAX (DAX) Index rising to its highest in nearly five years, amid optimism that U.S. lawmakers will agree on a budget.

ThyssenKrupp AG (TKA) added 1.2 percent as a gauge of basic resources stocks climbed. Deutsche Bank AG (DBK) gained 2.2 percent. Air Berlin Plc (AB1), Europe’s third-biggest discount carrier, jumped 8.4 percent after the airline sold its frequent flyer program.

The DAX added 0.6 percent to 7,653.58 at the close of trading in Frankfurt, its highest level since January 2008. The gauge has rallied 28 percent from its low on June 5 as European Central Bank policy makers agreed on an unlimited bond-purchase program and the Federal Reserve announced a third round of quantitative easing. The broader HDAX Index also rose 0.6 percent today.

“As the year is coming to a close, we remain hostage to a fiscal cliff deal,” Ion-Marc Valahu, co-founder and fund manager at Clairinvest in Geneva, wrote in a message. ”So far, markets have been helped up on the expectation a deal will happen.”

U.S. President Barack Obama, who met Republican House Speaker John Boehner at the White House yesterday, lowered his tax-revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000.

Obama’s revised plan would raise $1.2 trillion in taxes in the next decade and cut $1.22 trillion in spending, said a person familiar with the talks. Obama wants a large enough debt ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of- living increases, said the person, who sought anonymity.

Boehner Plan

Boehner said today that he will push a budget “plan B” measure that would include tax increases on income of more than $1 million, while continuing to negotiate with Obama.

He said that he still hopes to reach a broader budget deal with the president and he expects the legislation to be on the House floor by the end of the week.

Boehner spoke after he and Majority Leader Eric Cantor briefed House Republicans on the negotiations during a private meeting.

ThyssenKrupp, Germany’s largest steelmaker, gained 1.2 percent to 18.14 euros. Salzgitter AG (SZG), the second-biggest, added 2.8 percent to 40.46 euros.

Kloeckner & Co. SE, Europe’s largest independent steel trader, advanced 0.9 percent to 9.08 euros.

A measure of commodities-linked stocks rose 1.1 percent for the biggest gain among the 19 industry groups on the Stoxx Europe 600 Index.

Banks Gain

Deutsche Bank and Commerzbank AG (CBK), Germany’s two biggest lenders, rose 2.2 percent to 33.25 euros and 3.7 percent to 1.50 euros, respectively.

Munich Re, the world’s largest reinsurer, advanced 1.7 percent to 136.65 euros.

Air Berlin surged 8.4 percent to 1.64 euros, its biggest gain in more than 15 months, as it sold a majority stake in its frequent flyer bonus program to partner and shareholder Etihad Airways for 184 million euros ($242 million). The transaction could help the discount carrier post its first annual profit since 2007.

Wacker Chemie AG (WCH), a maker of the main raw material in solar panels, jumped 4.3 percent to 49.71 euros as Chancellor Angela Merkel said the renewable energy share of the market in Germany will rise to 23 percent in 2012 from about 20 percent in 2011.

Sky Deutschland AG (SKYD), the German pay-TV provider half-owned by Rupert Murdoch’s News Corp., lost 0.7 percent to 4.08 euros. Kabel Deutschland Holding AG (KD8), Germany’s largest cable operator, fell 1.1 percent to 56.59 euros.

A gauge of telecommunication stocks fell the most of all industry groups on the Stoxx 600, slipping 0.3 percent.

Adidas AG (ADS), the world’s second-biggest sporting-goods maker, slid 1 percent to 67.50 euros.

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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