German Stocks Advance to 13-Month High Before Ruling
German stocks climbed to a 13-month high amid mounting optimism that the top constitutional court will rule tomorrow in favor of the country’s participation in the European Stability Mechanism, the region’s permanent bailout fund.
Deutsche Bank AG (DBK) rose 4.1 percent after unveiling a cost- saving plan. HeidelbergCement AG (HEI) slid after Bank of America Corp. said the cement maker will not reach its target for a 3 billion-euro ($3.8 billion) profit in the next three years. Adidas AG (ADS) paced losses in European personal and household-goods shares.
The DAX Index (DAX) gained 1.3 percent to 7,310.11 at the close in Frankfurt, the highest since July 26 last year. The measure has rallied 22 percent from this year’s low on June 5 as European Central Bank President Mario Draghi pledged to preserve the euro and speculation grew the U.S. Federal Reserve will announce a third round of bond purchases. The broader HDAX Index added 1.2 percent today.
“There is a general cautious optimism that the court will not strike down ESM,”said Chris Beauchamp, a market analyst at IG Index in London.
The Federal Constitutional Court in Karlsruhe today rejected a last-minute bid to delay a case over the ESM, saying it will issue its ruling as scheduled at 10 a.m. tomorrow.
Investors are speculating that U.S. Federal Reserve Chairman Ben S. Bernanke will announce a stimulus program at a two-day meeting of the Federal Open Market Committee starting tomorrow, Beauchamp said.
Deutsche Bank rallied 4.1 percent to 33.15 euros, the highest since April 27, reversing earlier losses of as much as 1.6 percent. Europe’s biggest bank by assets said it will target an after-tax return on equity of at least 12 percent by 2015.
Deutsche Bank also said it will incur a one-time cost of 4 billion euros to achieve savings of 4.5 billion euros annually by 2015.
Henkel AG, the Dusseldorf-based maker of Persil detergent, advanced 1.1 percent to 61.85 euros. The company should benefit from easing commodities prices, given its higher exposure to raw materials, Sanford C. Bernstein & Co. said, rating the stock outperform, equivalent to a buy recommendation.
Solarworld AG, the world’s fourth-largest solar-panel maker, jumped 8 percent to 1.31 euros, rising for a fourth consecutive day.
HeidelbergCement dropped 0.3 percent to 43.40 euros, after earlier falling as much as 2.8 percent. Bank of America said the world’s third-largest maker of cement will not reach its 3 billion-euro goal for earnings before interest, taxes, depreciation and amortization in the next three years.
Adidas, the world’s second-biggest sporting-goods maker, retreated 0.5 percent to 63.76 euros as a gauge of European personal and household-goods makers posted the worst decline of the 19 industry groups on the Stoxx Europe 600 Index.
Adidas’s reliance on sales in China is weighing on the stock, amid concerns that growth in the world’s second-biggest economy is slowing, according to Huber. The company gets about 9 percent of its revenue from China.
Puma SE (PUM), Europe’s second-largest sporting-goods maker, lost 1.1 percent to 234 euros.
Hugo Boss AG (BOSS) tumbled 8 percent to 70.91 euros, the biggest drop since Oct. 4, after U.K. rival Burberry Group Plc said it expects adjusted profit before tax in the current fiscal year to be at the lower end of analyst estimates.
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