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German Stocks Advance as Deutsche Bank, Commerzbank Rise

July 18 (Bloomberg) -- German stocks climbed to their highest level since May, led by a rally in financial companies, as Morgan Stanley reported earnings that topped estimates and data showed U.S. jobless claims fell to a two-month low.

Deutsche Bank rallied 2.9 percent as Exane BNP Paribas recommended investors buy the shares. Commerzbank AG climbed 1.8 percent. ThyssenKrupp AG gained 3.7 percent after Vale SA said it will keep its stake in the German steelmaker’s plant in Brazil.

The benchmark DAX Index increased 1 percent to 8,337.09 at the close in Frankfurt. The gauge earlier fell as much as 0.5 percent after SAP AG abandoned its revenue forecasts. The broader HDAX Index rose 1.1 percent today.

Stocks climbed as Morgan Stanley posted second-quarter earnings that beat analysts’ estimates after stock-trading revenue jumped and wealth-management profit margins climbed to a record. The firm also announced a $500 million stock buyback.

European investment-bank “valuations are cheap and the Q2 reporting season is looking quite cheerful,” wrote Daniel Davies, an analyst at Exane BNP Paribas in a report to clients dated today. “A strong Q2 results season could be a catalyst for upgrades, particularly for Deutsche Bank.”

The volume of shares changing hands in companies listed on the DAX was 11 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.

Bank Shares

Deutsche Bank rallied 2.9 percent to 34.61 euros. Exane reiterated its outperform recommendation for the lender, the equivalent of a buy rating. Macquarie Bank also upgraded the stock today to neutral from underperform.

Commerzbank AG, Germany’s second largest bank, increased 1.8 percent to 6.47 euros as a gauge of European bank stocks increased 2.2 percent.

The European Central Bank today said it had altered its collateral rules for refinancing banks and said it’s looking at ways to boost lending to small and medium-sized companies by changing the eligibility of asset-backed securities.

The central bank said it will reduce the risk premium, or haircut, applicable to asset-backed securities to 10 percent from 16 percent, according to an e-mailed statement today.

Elsewhere, ThyssenKrupp jumped 3.7 percent to 16.91 euros after Vale Chief Executive Officer Murilo Ferreira told reporters in Brasilia yesterday that the company will keep its 26 percent stake in ThyssenKrupp’s steel plant in Rio de Janeiro.

A gauge of European basic-resources companies climbed 1.1 percent as U.S. data showed first-time jobless claims fell to a two-month low last week, in a signal the world’s largest economy is strengthening.

Salzgitter AG, Germany’s second-largest steelmaker, increased 1.1 percent to 27.46 euros.

Continental AG led automotive-related companies higher, climbing 2.3 percent to 115.9 pence. Volkswagen AG gained 1.4 percent to 172.05 pence and Daimler AG increased 1.7 percent to 53.33 euros.

K+S AG paced declining shares, falling 1.9 percent to 25.75 euros for the biggest decline on the DAX index.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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

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