German Stocks Posts Biggest Two-Day Gain Since September

German stocks advanced, posting the biggest two-day gain since September, after the Federal Reserve’s decision to slow the pace of its stimulus boosted investor confidence in the U.S. economic recovery.

SAP AG (SAP), the world’s largest maker of business-management software, advanced 1.7 percent after competitor Oracle Corp. said bookings of cloud software rose in the second quarter. BASF SE (BAS) added 1.3 percent after FAZ reported it is preparing a bid for RWE Dea AG.

The DAX Index (DAX) gained 1.6 percent to 9,325.25 at 10:06 a.m. in Frankfurt, after climbing 1.1 percent yesterday. The equity benchmark gauge has surged 22 percent this year as central banks around the world pledged to leave interest rates low for a prolonged period of time. The broader HDAX Index increased 1.5 percent today.

“Yesterday saw a positive surprise from the Fed where the central bank found a sweet spot by slowly reducing the stimulus and not scaring investors,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “German equities are off to a good start, and the Christmas rally seems to have started.”

The U.S. central bank said it will reduce its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the monetary stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from one of its worst recessions. The Fed’s purchases will be divided between $40 billion in Treasuries and $35 billion in mortgage bonds starting in January, Bernanke said.

The central bank reiterated that it will probably hold its target interest rate near zero at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no higher than 2.5 percent. A majority of Federal Open Market Committee participants, or 12 out of 17, predict the first increase in the main interest rate in 2015.

About 34 percent of economists surveyed by Bloomberg on Dec. 6 had forecast that the central bank will reduce its monthly bond-buying program at this meeting. The majority had projected the Fed would delay tapering until 2014, the survey showed.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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