German Stocks Advance to Four-Week High on EarningsJonathan Morgan
German stocks advanced to a four-week high amid optimism central banks will opt for further stimulus, and as companies including Deutsche Bank AG and Wacker Chemie AG posted earnings.
Deutsche Bank surged 6.1 percent after it said first-quarter net income rose to 1.65 billion euros ($2.16 billion) and announced plans to raise as much as 5 billion euros in new capital. Wacker Chemie AG jumped 9 percent after posting quarterly earnings in line with estimates and saying demand for its polysilicon products increased. Deutsche Boerse AG, operator of the Frankfurt stock exchange, advanced 1.5 percent.
The DAX Index climbed 0.5 percent to 7,913.71 at the close of trading in Frankfurt, its highest level since April 2. The gauge gained 1.5 percent in the month, after adding 4.8 percent last week as the U.K. avoided a triple-dip recession and investors speculated the European Central Bank will cut interest rates. The broader HDAX Index also gained 0.5 percent today.
“Germany is clearly driven by the numbers which came out today,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, said in a telephone interview. “Deutsche Bank announced surprisingly good figures. The influence of the earnings season is clearly the main focus.”
The volume of shares changing hands in companies on the DAX was 9.6 percent lower than the average of the last 30 days, data compiled by Bloomberg showed.
German consumer confidence will climb to the highest in more than 5 1/2 years in May as low unemployment and rising incomes boost household spending in Europe’s largest economy, GfK AG predicted.
The Nuremberg-based market research company forecast today that its consumer-sentiment index, based on a survey of about 2,000 people, will increase to 6.2 next month from a revised 6 in April. That would be the highest since October 2007. Economists expected the index to remain at its initial April reading of 5.9, according to the median of 28 estimates in a Bloomberg News survey.
The U.S. Federal Reserve starts a two-day policy meeting today and may consider renewing its commitment to bond-buying. The European Central Bank will cut its benchmark interest rate on May 2 to a record low of 0.5 percent, according to 43 of 70 projections compiled by Bloomberg.
Deutsche Bank surged 6.1 percent to 34.91 euros after it said first-quarter net income rose to 1.65 billion euros, exceeding the 1.21 billion-euro average estimate of six analysts surveyed by Bloomberg. Germany’s biggest bank set aside 354 million euros against losses from non-performing loans in the quarter, less than analysts’ predictions for 425 million euros.
Separately, the company is raising about 5 billion euros in capital. The Frankfurt-based lender said it issued 2.96 billion euros of stock at 32.90 euros apiece, exceeding an initial goal of 2.8 billion euros, as part of the capital increase. It will also sell 2 billion euros of subordinated debt, co-Chief Executive Officer Anshu Jain said on a conference call today.
RBC Capital Markets raised Deutsche Bank to outperform from sector perform, with a price target of 40 a share.
Wacker Chemie AG jumped 9 percent to 58.02 euros. The fourth-biggest maker of polysilicon posted quarterly earnings in line with estimates and said demand for the component for solar panels was “noticeably” higher than in the previous period.
Earnings before interest, taxes, depreciation and amortization in the first quarter fell 23 percent from a year earlier to 164.5 million euros, the Munich-based company said in a statement. Analysts surveyed by Bloomberg had predicted 166.9 million euros.
Deutsche Boerse added 1.5 percent to 47.40 euros, even after reporting a 26 percent drop in first-quarter profit as trading volumes declined. Earnings before interest and taxes slid to 192 million euros from 260 million euros a year earlier, the company said in a statement after the market closed yesterday. Net income fell 17 percent to 121.2 million euros.
Metro AG, Germany’s biggest retailer, added 0.9 percent to 23.68 euros after Citigroup Inc. upgraded the shares to neutral from sell, citing a recent rally in “similarly levered and operationally challenged retail businesses.” Citigroup raised its target price for the shares to 23.50 euros apiece.
Fresenius Medical Care AG fell 0.2 percent to 52.40 euros, paring earlier losses of as much as 4.8 percent, after the world’s biggest provider of kidney dialysis reported first-quarter net income of $225 million, missing analysts’ estimates for $261.7 million.
Fresenius SE, which owns about 30 percent of Fresenius Medical, declined 1.5 percent to 95.22 euros. Germany’s biggest operator of private hospitals posted first-quarter earnings before interest and taxes that missed estimates.
Net income adjusted for some items rose to 224 million euros, the Bad Homburg, Germany-based company said. Analysts had forecast 236 million euros.
Solarworld AG retreated 1 percent to 70 euro cents, after earlier tumbling as much as 14 percent. Germany’s biggest maker of solar panels made a preliminary agreement with most of its creditors that will allow it reduce its noncurrent liabilities by about 60 percent.
Solarworld will propose a capital reduction of about 95 percent, combined with a capital increase against contribution in kind, at an extraordinary shareholders meeting, the Bonn-based company said in a statement.