German stocks rose, with the DAX (DAX) Index jumping to its highest in nearly five years after the U.S. Congress agreed a budget bill that avoids most scheduled tax increases threatening a recovery in the world’s largest economy.
The DAX climbed 2.2 percent to 7,778.78 at the close of trading in Frankfurt, the biggest gain since Nov. 19 and its highest level since January 2008. The gauge rallied 29 percent in 2012, its best annual performance since 2003, as the European Central Bank and the Federal Reserve expanded asset purchase programs. The broader HDAX Index (HDAX) also rose 2.2 percent today.
“It was the right thing to do to buy equities ahead of this outcome and we feel the market was a bit too cautious,” Herbert Perus, who helps oversee about $36 billion as head of equities at Raiffeisen in Vienna, said, referring to the U.S. agreement.
The U.S. House of Representatives passed the budget legislation just after 11 p.m. in Washington yesterday, breaking a yearlong impasse over how to prevent more than $600 billion in tax increases and spending cuts. Still, Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating.
“The U.S. is a leading indicator for the world economy. Lawmakers will find another compromise in the last minute again in February, and this will lead to another rally in March,” said Perus.
U.S. President Barack Obama said he will sign the bill after the 257-167 vote. The Senate approved the proposals 89-8 in the first hours of Jan. 1.
The number of shares changing hands in DAX companies today was 27 percent higher than the 30-day average, according to data compiled by Bloomberg.
BMW, the world’s biggest maker of luxury cars, rose 4.1 percent to 75.93 euros, its highest level since August 1992. Preferred shares of Volkswagen, the second-biggest carmaker, gained 4 percent to 179 euros, its highest price in more than 20 years.
Infineon, Europe’s second-biggest semiconductor manufacturer, advanced 4.3 percent to 6.40 euros.
Deutsche Bank AG (DBK), Germany’s largest lender, gained 3.7 percent to 34.16 euros. Juergen Fitschen, the company’s co-chief executive officer, said in an interview with Boersen Zeitung on Dec. 29 that the bank favors the emergence of pan-European lenders to compete with other regions. He also said he sees further consolidation among European lenders.
Commerzbank AG (CBK), the second-biggest, climbed 3.9 percent to 1.49 euros.
SMA Solar Technology, the country’s largest solar company by market value, reversed earlier gains, falling 1.1 percent to 18.80 euros. German developers added a record number of solar panels in the first 11 months of last year, more than double the quantity targeted by the government. Still, solar installations fell 34 percent in November from a year earlier, according to data from federal grid regulator Bundesnetzagentur.
Fresenius Medical Care AG, the world’s biggest supplier of kidney dialysis, declined 0.3 percent to 52.17 euros, the steepest decline in the DAX. Obama said spending in the Medicare healthcare program can be reduced as the country now needs to tame its debt level.
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