German Stocks Advance as Investors Await Fed DecisionInyoung Hwang
German stocks advanced to a record, as investors awaited the Federal Reserve’s decision on reducing its monthly bond purchases.
HeidelbergCement AG rose 1.4 percent after Goldman Sachs Group Inc. raised its recommendation on the shares. Siemens AG climbed to its highest price since July 2011 after nominating SAP AG’s Jim Hagemann Snabe to its supervisory board and appointing a new chief financial officer. Lanxess AG fell 2.8 percent after Citigroup Inc. said the synthetic-rubber maker’s plan to cut 1,000 jobs and management bonuses to save about 100 million euros ($134 million) would put additional pressure on its cash flow.
The DAX gained 0.5 percent to 8,636.06 at the close of trading in Frankfurt. The gauge has surged 13 percent this year as central banks around the world pledged to leave interest rates low for a prolonged period. The broader HDAX Index also added 0.5 percent today.
“We continue to believe they’re going to taper today and we think $10 billion is the most likely outcome,” Andrew Wilson, head of fixed income at Goldman Sachs Asset Management, told Francine Lacqua on Bloomberg Television in London. “There’s certainly job creation happening and that’s what the Fed had mentioned initially.”
The volume of shares changing hands in DAX-listed companies was 13 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
The Federal Open Market Committee ends a two-day policy meeting today, at which officials will probably decide to lower its $85 billion of monthly bond purchases. Of 64 economists surveyed by Bloomberg News, 33 predict the Fed will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.
The FOMC releases both its policy statement and forecasts for economic growth, inflation and unemployment at 2 p.m. New York time. Chairman Ben S. Bernanke will hold a press conference half an hour later.
In the U.S., builders began work on fewer U.S. homes in August than projected and applications for future work declined more than forecast, a Commerce Department report showed today in Washington.
Housing starts rose 0.9 percent to an 891,000 annual rate, following the prior month’s 883,000 pace that was weaker than previously estimated. The median estimate of 83 economists surveyed by Bloomberg called for 917,000. Permits dropped 3.8 percent to a 918,000 pace.
Investors are also watching the latest pre-election surveys on this weekend’s vote in Germany. Support for Chancellor Angela Merkel’s Christian Democratic bloc held at 39 percent in a weekly Forsa poll for Stern magazine published yesterday, while her Free Democratic coalition partner lost a percentage point to 5 percent, the threshold to win parliamentary seats.
Support for Peer Steinbrueck’s Social Democrats was unchanged at 25 percent and the Greens held at 9 percent. That leaves neither main bloc with a majority, according to Stern.
Merkel is campaigning on her economic stewardship and her insistence on reforms in exchange for aid during the debt crisis. Her case was bolstered yesterday as data showed German investor confidence climbed to the highest level in more than three years in September.
HeidelbergCement added 1.4 percent to 58.20 euros. Goldman Sachs raised its rating on the cement maker to buy from sell, saying increased spending will drive growth opportunities.
Siemens climbed 1.3 percent to 89.70 euros. Europe’s biggest engineering company said it has nominated Snabe to succeed former Deutsche Bank AG Chief Executive Officer Josef Ackermann on the supervisory board. Siemens also appointed Ralf Thomas as CFO. Previously, he was finance chief of the industry division.
Thyssenkrupp AG rose 1.9 percent to 17.21 euros, its highest price since July 25. Chief Executive Officer Guido Kerkhoff said Germany’s largest steelmaker isn’t working on a plan to raise capital and that it still expects to sell its Steel Americas unit.
Lanxess fell 2.8 percent to 49.95 euros. The Cologne-based company said late yesterday that its savings program will cost 150 million euros in one-time charges that will be booked in 2013 and 2014. Citigroup reiterated its sell rating on the shares, saying the plan isn’t a game changer.
Chief Executive Officer Axel Heitmann said in August that he would review strategy after orders slumped and he had to abandon a 2014 profit forecast. Lanxess, which generates about 40 percent of sales from the auto and tire industries, has suffered as European car sales faltered, with a decline in August bringing deliveries this year to the lowest since records began in 1990.
Hochtief AG fell 1.6 percent to 62.39 euros. Goldman Sachs cuts its rating on Germany’s largest construction company to neutral from buy following a 44 percent rally this year.