German Stocks Advance After Summers Withdraws Fed BidJonathan Morgan
German stocks rose to a record after Lawrence Summers withdrew from the race to succeed Ben S. Bernanke as Federal Reserve chairman, clearing the way for Janet Yellen, who investors say will favor slower paring of stimulus.
Volkswagen AG gained after the Frankfurter Allgemeine Sonntagszeitung reported that the carmaker is in talks to raise its stake in its Chinese joint venture to 50 percent from 40 percent. Fresenius SE climbed 2.7 percent after MainFirst Bank AG upgraded its recommendation on the shares.
The DAX Index added 1.2 percent to 8,613 at the close of trading in Frankfurt. The gauge rose 2.8 percent last week amid better-than-expected Chinese economic data and as U.S. President Barack Obama delayed a decision on military action against Syria. The broader HDAX Index also rose 1.2 percent today.
“The key story is that former Treasury Secretary Summers, known for his hawkish course, has withdrawn from the Fed race,” Christoph Hock, an equity sales trader at Alpha Wertpapierhandels GmbH in Frankfurt, wrote in a note. “Yellen, a policy dove, is now the frontrunner. Markets across all asset classes are cheering this move.”
Summers withdrew his nomination to lead the Fed before a two-day policy meeting starting tomorrow at which the central bank is forecast to reduce its stimulus measures. The former treasury secretary would tighten Fed policy more than Yellen, his main rival to replace Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders last week.
“News of Summers departing from the race has made risk assets move in a herd in the same direction,” Chris Beauchamp, a market analyst at IG in London, said in a telephone interview. “We’ve seen a tiny bit of profit taking this afternoon and this could move turn into a broader move in advance of the German elections.”
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov reached an agreement over the weekend on a framework for finding, securing and destroying Syrian President Bashar al-Assad’s stock of poison gas. The deal calls for early signs of progress, giving Assad one week to submit an inventory of his toxic weapons, and calls for initial inspections in Syria by November.
German Chancellor Angela Merkel’s bid to win a third term got a boost over the weekend as her Bavarian ally won a state ballot, seven days before the national vote.
The Christian Social Union, the sister party to Merkel’s Christian Democratic Union, took an absolute majority in yesterday’s election, allowing the party to govern without a coalition partner in the state assembly in Munich.
Volkswagen gained 0.7 percent to 183.05 euros. Europe’s biggest automaker is in talks to increase its stake in Chinese venture FAW-Volkswagen Automotive Co., according to the report, which cited an interview with Chief Executive Officer Martin Winterkorn. Eric Felber, a spokesman for Wolfsburg, Germany-based VW, confirmed Winterkorn’s comments.
Fresenius rose 2.7 percent to 93.56 euros after Mainfirst upgraded the health-care company to outperform, similar to a buy rating, from underperform. Fresenius last week agreed to pay Rhoen-Klinikum AG 3.07 billion euros ($4.1 billion) for 43 hospitals, sidestepping competitors who had tried to block a deal to create Europe’s biggest chain of private hospitals.
Allianz SE advanced 2.5 percent to 115.60 euros. Europe’s largest insurer raised its 2016 target for car insurance and related-product premiums to 3.5 billion euros from 2.8 billion euros.
K+S AG, a potash producer, climbed 2.5 percent to 23.15 euros. A gauge of chemical makers posted the biggest gain on the Stoxx Europe 600 Index on bets the leading bidder for OAO Uralkali, the biggest maker of the fertilizer, will stabilize the market.
Russian entrepreneur Vladimir Kogan, a longtime ally of President Vladimir Putin, is the leading contender for the Berezniki, Russia-based producer, according to people familiar with the situation. Uralkali’s split in July from a potash marketing venture with Belarus roiled the $20 billion market.
BASF SE rose 3.7 percent to 72.34 euros, its biggest gain since April 26. Analysts from JPMorgan Chase & Co. and Kepler Cheuvreux said the world’s largest chemical company is interested in merger and acquisition activity and it reiterated its production forecasts at an oil and gas roundtable meeting.
ThyssenKrupp AG, the German steelmaker seeking to divest its Americas unit, fell 0.6 percent to 16.77 euros after two people briefed on its plans said it may hold on to its plant in Brazil and sell only the U.S. operation.
Bids for the Brazilian mill were too low and the company has accepted the Americas unit won’t fetch its 3.4 billion-euro book value and faces a writedown, one person said late last week, asking not to be named as the talks are private. A deal to sell the U.S. mill would require some of the Brazilian plant’s output be processed at the Alabama site, the other said.
The volume of shares changing hands in DAX-listed companies was 3.1 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.