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German Stocks Rise on China Stimulus Speculation

German stocks gained, after yesterday slumping the most in seven weeks, on speculation China will announce further stimulus measures and as Spain’s Cabinet approved the country’s budget for 2013.

Bayer AG climbed 1.3 percent. Volkswagen AG fell 2.1 percent after saying that some of its competitors risk going out of business without financial aid from European governments.

The benchmark DAX Index climbed 0.2 percent to 7,290.02 at the close in Frankfurt, after earlier advancing as much as 0.7 percent. The equity benchmark has surged 14 percent this quarter, erasing its 7.6 percent slide in the second quarter. The gauge has rallied 22 percent from its low on June 5 as European Central Bank policy makers agreed on an unlimited asset-purchase program and the Federal Reserve announced a third round of quantitative easing. The broader HDAX Index rose 0.3 percent today.

“The market is higher on speculations swirling that China will announce a large stimulus package after China National Day on Oct. 1,” said Stephane Ekolo, chief European strategist at Market Securities in London.

China’s equity benchmark, the Shanghai Composite, rallied as much as 3.2 percent after the Shanghai Securities News reported speculation that the China Securities Regulatory Commission would announce 10 market-stimulating measures.

The People’s Bank of China may cut interest rates or the reserve-requirement ratio for lenders, according to an academic adviser to the central bank. Chen Yulu added that reverse repurchase operations remained the key monetary tool for now.

Spanish Protests

Spain’s Cabinet approved the budget for 2013, which will focus on cuts rather than tax increases, Deputy Prime Minister Soraya Saenz de Santamaria said today. Spain’s bond yields surged yesterday amid speculation that the country’s government will delay asking the European Union for further aid.

The Cabinet also approved a package of reforms that Economy Minister Luis de Guindos had promised to introduce during a meeting of euro-area finance ministers this month.

Thousands of Spanish protesters demonstrated late yesterday in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures.

In the U.S., a report showed the world’s largest economy grew in the second quarter less than previously forecast, reflecting slower gains in consumer spending and farm inventories.

The U.S. economy expanded at a 1.3 percent pace. The revision, the third estimate for the quarter, compared with a previous estimate of 1.7 percent and the Bloomberg survey’s median forecast of 1.7 percent.

Competing Treatment

Bayer increased 1.3 percent to 68.40 euros, contributing the most to an advance by a gauge of European chemical makers. Pfizer Inc. and Bristol-Myers Squibb Co. may have to wait until March to discover whether U.S. regulators will allow them to sell a competing treatment to Bayer’s Xarelto pill. The two U.S.-based companies said that the Food and Drug Administration has set a date of March 17 to issue its decision.

Volkswagen’s preferred shares lost 2.1 percent to 143.30 euros. The world’s second-biggest automobile manufacturer said that European car sales will fail to recover next year, while pressure mounts to lower prices of vehicles.

Solarworld AG soared 9.4 percent to 1.63 euros. Germany’s biggest maker of solar panels rose following a report that Sharp Corp. plans to reduce its production of solar equipment in the U.S. and Europe. SMA Solar Technology AG surged 10 percent to 28.65 euros, its largest gain in two months.

Rhoen-Klinikum AG advanced 1.4 percent to 15.27 euros as the German hospital operator said Chief Executive Officer Wolfgang Pfoehler and Chief Financial Officer Erik Hamann will leave following a failed takeover bid by Fresenius SE.

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