German stocks advanced, led by luxury-car makers, as borrowing costs fell at France’s first debt sale after Standard & Poor’s downgraded the country and eight other euro-area nations.
Bayerische Motoren Werke AG and Daimler AG led European carmakers higher after Goldman Sachs Group Inc. recommended the industry. HeidelbergCement AG retreated after competitor Holcim Ltd. said it will book a 775 million-Swiss franc ($813 million) charge to writedown investments.
The benchmark DAX Index rose 1.3 percent to 6,220.01 at the close in Frankfurt. The gauge gained 1.4 percent last week after the Federal Reserve confirmed the U.S. economy continues to grow and euro-area nations sold debt at lower borrowing costs. The broader HDAX Index climbed 1.2 percent today.
“The much feared backlash after Friday’s headlines so far failed to appear,” said Gregor Kuhn, a trader at IG Markets in Dusseldorf. “The downgrading of nine euro-countries’ creditworthiness seems to already be reflected” in the bund-futures price. “The successful auction of French government bonds this afternoon supports this theory,” he said.
France sold 1.9 billion euros ($2.4 billion) of 51-week notes at a yield of 0.406 percent, down from 0.454 percent on Jan. 9. The Treasury also sold 4.5 billion euros of three-month notes and 2.2 billion euros of six-month bills. Yields fell on both.
The rating company downgraded France to AA+ from AAA, with a negative outlook, after the close of European trading on Jan. 13. It cut Cyprus, Italy, Portugal and Spain by two grades, while also lowering the long-term ratings on Austria, Malta, Slovakia and Slovenia.
Germany, Belgium, Estonia, Finland, Ireland, Luxembourg and the Netherlands had their ratings affirmed by S&P.
European leaders will try this week to rescue efforts to deliver new fiscal rules and cut Greece’s debt burden as they urge investors to ignore the S&P downgrades.
Greek officials will reconvene with creditors on Jan. 18 after discussions stalled last week over the size of investor losses in a proposed debt swap, raising the threat of default. German Chancellor Angela Merkel and French President Nicolas Sarkozy will also meet, as the European Central Bank warns governments against “watering down” a revamp of budget laws.
Carmakers Lead Gains
BMW and Daimler added 2.6 percent to 59.96 euros and 3.6 percent to 39.35 euros, respectively. Daimler was added to Goldman’s “conviction buy” list.
The group of carmakers was the best performer in the Stoxx Europe 600 Index today, gaining 3.1 percent, after Goldman Sachs reiterated its “attractive” view on the industry.
“The sector is now discounting a substantial decline in returns in 2012,” Goldman analyst Stefan Burgstaller wrote in a report to clients dated today. The European Union car industry “is in better financial and operational shape than in 2007, and we believe it is well placed to benefit from global economic realignment.”
ThyssenKrupp AG, Germany’s largest steelmaker, rose 2.5 percent to 19.60 euros, the highest price in three months. The company is close to selling its stainless steel arm, Reuters reported, citing an investment banking source with direct knowledge of process.
HeidelbergCement, Europe’s third-largest cement maker, slumped 3.4 percent to 33.96 euros. Holcim, the world’s second-biggest cement maker will write off 415 million francs related to debt and accrued interest owed by a former unit in South Africa. The company will also book 360 million francs in writedowns tied to plants in Spain, eastern Europe and the U.S.
Kontron AG jumped 7.4 percent to 5.72 euros, its highest price since Sep. 29. The company said full-year revenue rose about 14 percent to more than 580 million euros. Kontron forecasts a “stable sales trend” for 2012.