German stocks advanced to a five- year high as business confidence rose more than forecast in January, and European Central Bank data showed banks will repay more long-term refinancing operation loans than estimated.
Bayer AG (BAYN) rose to a record after Bank of America Merrill Lynch put the German drugs and chemicals maker on its list of top European stocks. K+S AG (SDF) dropped as Morgan Stanley downgraded the shares. SolarWorld AG (SWV) slid 30 percent after saying it will restructure its finances to remain a going concern.
The DAX Index (DAX) climbed 1.4 percent to 7,857.97 at the close of trading in Frankfurt, its highest level since January 2008. The benchmark gained 2 percent this week, and has risen 3.2 percent so far this year as U.S. lawmakers agreed on a budget and American companies reported better-than-expected earnings. The broader HDAX Index added 1.3 percent today.
“This is a good signal that banks are able to refinance themselves, a further sign that the banking crisis is diminishing,” Robert Halver, head of capital markets research at Baader Bank AG in Frankfurt, said in a telephone interview. “The big threat of 2013 was the economy, and the picture is stabilizing. I spoke with some asset managers today who were talking about buying equities.”
The volume of shares changing hands in companies listed on the equity benchmark was 0.8 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 104.2 in January, from 102.4 the previous month. That’s the third month of gains and the highest reading since June. Sentiment fell to a 2 1/2 year low in October. Economists predicted a gain to 103, according to the median of 41 forecasts in a Bloomberg News survey.
Some 278 financial institutions will return 137.2 billion euros ($184.4 billion) on Jan. 30, the Frankfurt-based ECB said in a statement today. That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. The ECB’s first three-year loan totalled 489 billion euros and banks can continue to make early repayments in coming weeks.
Bayer added 4.8 percent to 75.92 euros, its highest price in more than 20 years.
“Strong execution” as Germany’s largest drugmaker begins to sell new medicines this year will probably boost investors’ confidence that it will get more than 5.5 billion euros in annual sales from the drug introductions, Sachin Jain and Graham Parry, London-based analysts at Merrill Lynch, wrote in a note to investors today. Average analyst expectations are for 3 billion euros in 2016 sales from new drugs, they wrote.
BASF SE (BAS), the world’s biggest chemical manufacturer, advanced 2.5 percent to 75.60 euros.
Henkel AG, the Dusseldorf-based maker of Persil detergent, gained 2.4 percent to 65.26 euros, its highest level since at least August 1992.
A gauge of chemical makers increased the most among the 19 industry groups in the Stoxx Europe 600 Index. (SXXP)
K+S AG, Europe’s biggest potash distributor, lost 0.6 percent to 34.45 euros, after earlier falling as much as 2.4 percent. Morgan Stanley cut the stock to underweight, a rating similar to sell, from equal weight.
SolarWorld slumped 30 percent to 1.11 euros, for its biggest drop since at least 1999. Germany’s biggest solar-panel maker said management plans financial restructuring to remain a going concern in what it called an “anticompetitive” market.
“Management is of the opinion that serious adjustments on the debt side are necessary, in particular with regard to the bonds and the assignable bank loans,” the Bonn-based company said late yesterday in a statement.
Salzgitter AG, the country’s second-biggest steelmaker, lost 3 percent to 35.73 euros as UBS AG downgraded the stock to sell. An unrealistic margin recovery has been priced into the shares, and the risk to 2013 earnings merits a 58 percent cut in UBS’s pretax profit estimate to 53 million euros, according to analyst Carsten Riek.
To contact the reporter on this story: Jonathan Morgan in Frankfurt at email@example.com
To contact the editor responsible for this story: Andrew Rummer at firstname.lastname@example.org