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German Stocks Rise as Fed Announces More Asset Purchases

Sept. 14 (Bloomberg) -- German stocks rose to a 14-month high as the Federal Reserve said it will buy mortgage-backed securities to boost growth in the world’s largest economy.

Commerzbank AG and Deutsche Bank AG, Germany’s two biggest lenders, added at least 3 percent as a gauge of banks contributed the most to the Stoxx Europe 600 Index’s advance. ThyssenKrupp AG climbed 6.4 percent after the stock was upgraded by Baader Bank AG.

The DAX Index added 1.4 percent to 7,412.13 at the close of trading in Frankfurt, its highest level since July 2011. The gauge advanced 2.7 percent this week and has risen 24 percent from this year’s low on June 5 as European Central Bank policy makers agreed on a bond-buying program, optimism mounted the Fed would announce further stimulus and Germany’s highest constitutional court approved the euro area’s permanent bailout fund. The broader HDAX Index gained 1.5 percent today.

“The big lift came as U.S. and Asian markets reacted very positively,” said Markus Huber, head of German sales trading at ETX Capital in London. “The Fed hasn’t put a final figure or date for asset purchases. If the Fed had done this, there would have been some profit taking. The central banks are letting investors know that they will do anything it takes, providing liquidity and putting inflation concerns on the back burner.”

The volume of shares changing hands on the DAX was 71 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

The Fed said it will increase its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. The central bank will continue to buy mortgage-backed securities until the outlook for the labor market substantially improves, the Federal Open Market Committee said yesterday in a statement at the end of its two-day meeting in Washington.

Funds Rate

The FOMC also said it will probably hold the federal funds rate near zero until at least the middle of 2015. The Fed had said the rate would stay low through late 2014. Fed officials said economic growth will improve faster than they had projected, as they upgraded their estimates for gross domestic product growth in 2013 and 2014.

Euro-area finance ministers and central-bank officials will hold a two-day meeting starting today in Cyprus to discuss plans for a banking union in the 17-nation currency zone.

Commerzbank and Deutsche Bank jumped 3.1 percent to 1.60 euros, and 5.2 percent to 33.90 euros, respectively. A gauge of banking stocks was the biggest riser of the 19 industry groups on the Stoxx Europe 600 Index.

ThyssenKrupp, Germany’s biggest steelmaker, climbed 6.4 percent to 18.49 euros as Baader Bank recommended buying the shares and set a price forecast of 20 euros.

Carmakers Advance

Volkswagen AG surged 4.9 percent to 152.50 euros, its highest price in almost 20 years. Europe’s largest carmaker said sales in August rose 19 percent to 719,500 vehicles.

Daimler AG, the third-biggest maker of luxury vehicles, added 3 percent to 40.12 euros. Bayerische Motoren Werke AG, the largest manufacturer of luxury cars, advanced 3.4 percent to 62 euros.

Lanxess AG rose 3.5 percent to 67.51 euros, its highest price since at least 2005.

Kloeckner & Co. SE, Europe’s largest independent steel trader, surged 7.6 percent to 8.79 euros after Baader Bank advised buying the shares.

Software AG gained 1.8 percent to 29.73 euros. The infrastructure software provider expects to grow, with the U.S. remaining its biggest market, Chief Executive Officer Karl-Heinz Streibich told Handelsblatt in an interview.

Merck KGaA, the maker of the Erbitux cancer drug, dropped 1.6 percent to 94.02 euros. A gauge of health-care stocks was the worst performer of the 19 industry groups in the Stoxx 600.

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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