German Stocks Rise as Draghi Maintains Recovery Stance
German stocks rose to their highest in more than five years as European Central Bank President Mario Draghi maintained his view that the euro-area economy will gradually recover later this year, even as policy makers reduced their economic and inflation forecasts.
Merck KGaA (MRK) rose to the highest price since its October 1995 initial public offering after the drugmaker reported profit that beat analyst estimates. Adidas AG increased to the highest since 1995 after its 2013 forecast outweighed a loss for the fourth quarter. Continental AG gained to its highest in more than five years after keeping its prediction for sales to increase this year even as the region’s auto market dropped in the first quarter more than expected.
The DAX Index (DAX) increased 0.3 percent to 7,939.77 at the close of trading in Frankfurt, its highest level since January 2008. The equity benchmark has gained 4.3 percent this year as U.S. lawmakers agreed on a budget avoiding automatic fiscal changes that had threatened to push the world’s biggest economy into a recession. The broader HDAX Index rose 0.3 percent today.
“The market had expected a little bit more from Draghi today, but the picture for equity markets is fairly bright,” Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf, said in a phone interview. “The signs are set for continued policy easing. Also, we have a continued recovery in the U.S., which gives strong support for other markets after the massive bullish signal with the Dow reaching new all-time highs.”
The U.S. economy, the world’s largest, grew at a modest to moderate pace across most of the country amid rising consumer demand for homes and autos, the Federal Reserve said late yesterday in its Beige Book business survey. The assessment helped push the Dow Jones Industrial Average to a record high.
The ECB today predicted the 17-nation economy will shrink 0.5 percent this year, more than the 0.3 percent contraction forecast three months ago. The central bank lowered its 2014 inflation projection to 1.3 percent from 1.4 percent.
“Later in 2013 economic activity should gradually recover, supported by a strengthening global backdrop and our accommodative monetary policy stance,” Draghi told a press conference in Frankfurt after policy makers left their benchmark interest rate at 0.75 percent, a record low.
The Bank of England left its four-year-old bond-purchase program unchanged today as policy makers debate more radical measures to aid the recovery. The BOE kept its key interest rate at a record-low 0.5 percent, where it has been since March 2009.
The volume of shares changing hands in DAX-listed companies was 21 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.
Merck advanced 2.9 percent to 112.20 euros. The maker of the cancer drug Erbitux said profit rose to 789.8 million euros ($1.03 billion) in the fourth quarter, higher than the 768.9 million-euro median estimate in a Bloomberg survey.
Adidas, which reported a 272 million-euro net loss for the fourth quarter, added 6.6 percent to 76.38 euros, the highest price since its November 1995 share sale. The owner of the Reebok brand said sales will increase at a “mid-single-digit” percentage pace in 2013. The company also proposed a dividend of 1.35 euros a share, a 35 percent increase from last year.
“We are well positioned to again achieve record sales in 2013,” Chief Executive Officer Herbert Hainer said in a statement. “2013 will also see a step change in the pace of operating margin expansion. And this, in turn, will lead to another year of double-digit earnings growth.”
Continental climbed 4.4 percent to 98 euros, its highest price since November 2007. Europe’s second-largest tiremaker forecast revenue will rise about 5 percent to more than 34 billion euros this year.
Hannover Re gained 2.6 percent to 62.81 euros, its highest price since at least January 1997. The world’s fourth-largest reinsurer proposed a record dividend of 2.60 euros a share plus a bonus of 40 cents a share, from 2.10 euros a year ago, after profit rose to the highest in the company’s history.
Lanxess AG (LXS) dropped 4.6 percent to 63.81 euros. The chemical maker that joined the DAX in September said it will idle a factory in Belgium and another in the U.S.
The factory closures, which will be implemented in the coming weeks, are a reaction to “soft” underlying demand, which has continued into 2013 across most businesses, the company said.
Lanxess earlier said fourth-quarter profit rose 37 percent after it exercised “strict cost discipline.”
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