German Stocks Climb as ECB Pledges Accommodative Policy

German stocks advanced for a second day as the European Central Bank estimated the regional economy will shrink less than previously forecast, and kept its interest rate at a record low, saying signs of recovery are nascent.

Bayerische Motoren Werke AG (BMW) surged to its highest price in at least 21 years after Bank of America Corp. recommended buying shares in the world’s largest maker of luxury cars. Siemens AG climbed 2.9 percent as Barclays Plc upgraded Europe’s biggest engineering company. SAP AG (SAP) fell to its lowest price since October 2012.

The DAX Index (DAX) rose 0.5 percent to 8,234.98 at the close in Frankfurt. The measure dropped 2.1 percent in August amid concern the U.S. and its allies will take military action against Syria for suspected chemical attacks. The broader HDAX Index added 0.5 percent today.

“We don’t see signals for a further rate cut by the ECB, but the weak outlook for inflation and moderate monetary growth speak for a continued loose monetary policy,” Ralf Umlauf, head of floor research at Helaba Hessen-Thueringen in Frankfurt, wrote in an e-mail. “We also think Draghi is trying to counteract the pressure on higher yields with the forward guidance.”

The volume of shares changing hands in DAX-listed companies was 24 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

Monetary Policy

ECB officials meeting in Frankfurt left the main refinancing rate at 0.5 percent for a fourth month, after reducing it by a quarter point in May. The decision was predicted by all 56 economists in a Bloomberg News survey.

The ECB today said the euro-area economy will shrink by 0.4 percent this year, an improvement from a previous prediction of 0.6 percent. It will expand by 1 percent in 2014, down from June’s forecast of 1.1 percent.

The euro-zone economy will recover “at a slow pace,” ECB President Mario Draghi said. “Our monetary policy stance will remain accommodative for as long as necessary, in line with the forward guidance provided in July. Risks continue to remain to the downside.”

The U.S. economy continued to grow from early July through late August, even as borrowing costs increased, the Federal Reserve said in its Beige Book survey of economic conditions late yesterday. Increased spending on cars and housing helped the U.S. economy maintain a “modest to moderate” pace of expansion in the period, according to the report.

BMW Outlook

BMW climbed 6 percent to 76.97 euros, its highest price since at least August 1992, according to data compiled by Bloomberg. Bank of America raised its recommendation for the stock to buy from neutral, saying the current consensus opinion among investors for no profit growth in 2014 may change and earnings estimates may be revised.

A gauge of carmakers posted the best performance among industry groups on the Stoxx Europe 600 Index, the regional benchmark. Daimler AG rose 1.4 percent to 54.07 euros. Continental AG gained 2.1 percent to 121.65 euros.

Siemens added 2.9 percent to 84.60 euros. Barclays upgraded the shares to overweight, a rating comparable to buy, from equal weight, which is similar to neutral.

SAP slid 1.4 percent to 53.42 euros, for a third day of declines.

Merck, the maker of the cancer drug Erbitux, fell 1.5 percent to 112.25 euros and Fresenius Medical Care AG, the world’s largest provider of kidney dialysis, dropped 2.2 percent to 48.45 euros.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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