German Stocks Extends Record on Fed Stimulus DecisionJonathan Morgan
German stocks rallied for a second day, with the benchmark DAX Index extending a record, as the Federal Reserve refrained from paring its bond purchases.
SAP AG, the largest supplier of business-management software, advanced after Commerzbank AG upgraded the shares. Daimler AG led carmakers higher. Axel Springer AG climbed 2.8 percent after Barclays Plc advised investors to buy the shares.
The DAX rose 0.7 percent to 8,694.18 at the close of trading in Frankfurt, its highest level since inception. The gauge is heading for a 2.2 percent increase this week, for a third week of gains, as the U.S. postponed a plan to attack Syria and investors watched the election campaign in Germany. The broader HDAX Index added 0.6 percent today.
“The Fed was able to deliver a positive surprise to the capital markets,” Roger Peeters, chief executive officer of Close Brothers Seydler Research AG in Frankfurt, wrote in an e-mail. “The recent expectation in the market has been a moderate tapering. The wording has left room for interpretation, when the Fed will finally change its extremely proactive policy, but obviously the moment has not come yet.”
The volume of shares changing hands in companies listed on the DAX was 41 percent higher than the average of the past 30 days, according to data compiled by Bloomberg.
The Fed yesterday unexpectedly refrained from reducing its $85 billion monthly bond buying, saying it needs to see more indications that the U.S. economy is improving sustainably. The median response of 64 economists in a Bloomberg survey had signaled the central bank would start tapering stimulus measures after a two-day policy meeting that ended yesterday.
“Conditions in the job market today are still far from what all of us would like to see,” Fed Chairman Ben S. Bernanke said in Washington after European markets closed. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”
Investors also turned their focus to German Chancellor Angela Merkel’s bid for re-election on Sept. 22. Merkel has campaigned on her leadership of the country through the regional debt crisis and a reduction in unemployment to a record low. Should her Christian Democratic-led bloc fall short of a majority with its Free Democrat coalition partner, Merkel may be forced into a so-called grand coalition with the opposition Social Democrats.
SAP advanced 0.6 percent to 55.60 euros after Commerzbank raised its recommendation on the stock to add from hold. Economic recovery in the U.S. and the euro area will drive growth in license revenue, the bank said.
Daimler gained 2.1 percent to 58.43 euros. Continental AG increased 1.5 percent to 125.10 euros.
Axel Springer, Europe’s biggest newspaper publisher, climbed 2.8 percent to 40.52 euros after Barclays Plc upgraded the shares to overweight, a rating comparable to buy, from equal weight, which is similar to neutral.
Rheinmetall AG advanced 2.1 percent to 42.54 euros, its highest price since Feb. 20. Bankhaus Lampe KG upgraded the armored-vehicle maker to buy from sell, and increased its 12-month estimate for the stock price by 53 percent to 46 euros.
Defense orders “will start to generate appreciable revenue contributions” from 2014, analyst Gordon Schoenell wrote in a note.
K+S AG, Europe’s biggest potash distributor, dropped 3.5 percent to 20.67 euros, for its third day of loss. Potash Corp. of Saskatchewan Inc., North America’s largest fertilizer producer, said global markets for the crop nutrient have been paralyzed in the wake of OAO Uralkali’s withdrawal from a joint venture with Belarus.
Volkswagen AG retreated 2.1 percent to 177.25 euros. The stock reversed earlier gains of as much as 2.4 percent and fell as much as 3.3 percent as investors weighed a report in Manager Magazin that said that Europe’s largest carmaker may miss profit goals as costs climb and sales growth slows. The company denied the story.
“The suggestion that Volkswagen isn’t committed to its targets is false,” the Wolfsburg-based carmaker said in an e-mailed statement. “Volkswagen completely stands behind its statements about the future development of the company.”