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German Stocks Advance on Central Bank Stimulus Optimism

German stocks advanced to a three- week high amid optimism central banks will opt for further stimulus, and as companies including Deutsche Bank AG (DBK) posted better than expected earnings.

Deutsche Bank surged 7.1 percent after it said first- quarter net income rose to 1.65 billion euros ($2.16 billion) and announced plans to raise as much as 5 billion euros in new capital. Deutsche Boerse AG, operator of the Frankfurt stock exchange, added 1.6 percent. Fresenius Medical Care AG slipped 4.3 percent after posting net income that missed estimates.

The DAX Index (DAX) climbed 0.7 percent to 7,927.19 at 10:28 a.m. in Frankfurt, its highest level since April 4. The gauge is heading toward a monthly gain of 1.7 percent, after adding 4.8 percent last week as the U.K. avoided a triple-dip recession and investors speculated the European Central Bank will cut interest rates. The broader HDAX Index climbed 0.6 percent today.

Germany is clearly driven by the numbers which came out today,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, said in a telephone interview. “Deutsche Bank announced surprisingly good figures. The influence of the earnings season is clearly the main focus.”

The U.S. Federal Reserve starts a two-day policy meeting today and may consider renewing its commitment to bond-buying. The European Central Bank will cut its benchmark interest rate on May 2 to a record low of 0.5 percent, according to 43 of 70 projections compiled by Bloomberg.

Deutsche Bank

Deutsche Bank surged 7.1 percent to 35.25 euros after it said first-quarter net income rose to 1.65 billion euros, exceeding the 1.21 billion-euro average estimate of six analysts surveyed by Bloomberg. Germany’s biggest bank set aside 354 million euros against losses from non-performing loans in the quarter, less than analysts’ predictions for 425 million euros.

Separately, the company is raising about 5 billion euros in capital. The Frankfurt-based lender said it issued 2.96 billion euros of stock at 32.90 euros apiece, exceeding an initial goal of 2.8 billion euros, as part of the capital increase. It will also sell 2 billion euros of subordinated debt, co-Chief Executive Officer Anshu Jain said on a conference call today.

RBC Capital Markets raised Deutsche Bank to outperform from sector perform, with a price target of 40 a share.

Deutsche Boerse added 1.6 percent to 47.45 euros, even after reporting a 26 percent drop in first-quarter profit as trading volumes declined. Earnings before interest and taxes slid to 192 million euros from 260 million euros a year earlier, the company said in a statement after the market closed yesterday. Net income fell 17 percent to 121.2 million euros.

Fresenius Medical

Fresenius Medical slumped 4.3 percent to 50.21 euros after the world’s biggest provider of kidney dialysis reported first- quarter net income of $225 million, missing analysts’ estimates for $261.7 million.

Fresenius SE, which owns about 30 percent of Fresenius Medical, lost 2.6 percent to 94.14 euros. Germany’s biggest operator of private hospitals posted first-quarter earnings before interest and taxes that missed estimates.

Net income adjusted for some items rose to 224 million euros, the Bad Homburg, Germany-based company said. Analysts had forecast 236 million euros.

LEG Immobilien AG (LEG) rose 0.6 percent to 42 euros. Germany’s largest residential landlord by market value said 2012 funds from operations excluding asset sales jumped 22 percent as rents increased and maintenance costs fell.

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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