Germany's DAX Index Rallies, Led by Banks; BMW, Siemens Advance

By Stefanie Haxel

Sept. 8 (Bloomberg) -- German stocks rallied, rebounding from a seven-week low, on speculation the U.S. government's takeover of Fannie Mae and Freddie Mac will shore up the mortgage market and limit credit losses.

Deutsche Bank AG climbed 8 percent and Commerzbank AG rose 4.9 percent, leading gains among financial shares. Siemens AG jumped the most in more than a month after Credit Suisse Group AG added Europe's largest engineering company to its ``focus list.'' Bayerische Motoren Werke AG increased 5.2 percent as UBS AG recommended buying shares in the world's biggest luxury carmaker.

The DAX Index added 199.34, or 3.3 percent, to 6,326.78 as of 2:55 p.m. in Frankfurt, on course for the steepest one-day advance since March 18. DAX futures expiring in September surged 3.5 percent to 6,334. The HDAX Index of the country's 110 biggest companies rose 3.3 percent.

``That's a recovery rally,'' Michael Scholz, an equity strategist at WestLB AG in Dusseldorf, said in a Bloomberg Television interview. ``The banking sector has suffered extreme losses since May. U.S. banks have a recovery potential of 10 to 15 percent and given the sector's weight, this will have an impact worldwide, also in Europe.''

The benchmark index for German equities lost 24 percent through Sept. 5 on concern more than $500 billion in credit- related losses and writedowns at the world's biggest financial firms and slowing economic growth will curb earnings.

U.S. Treasury Secretary Henry Paulson said the government will provide short-term funding to the two biggest U.S. mortgage- finance companies and purchase debt backed by home loans in the open market.

Bank Shares

Deutsche Bank, Germany's largest bank, surged 4.56 euros to 61.25. Commerzbank, the second-biggest, added 82 cents to 17.64 euros. Hypo Real Estate Holding AG, the country's second-largest commercial-property lender, climbed 79 cents, or 4.9 percent, to 16.79 euros, the steepest increase in more than six weeks.

Deutsche Boerse AG rallied 4.27 euros, or 6.8 percent, to 66.68, snapping a three-day decline. The operator of the Frankfurt stock exchange plans to defend itself from a potential breakup its two biggest investors, Frankfurter Allgemeine Sonntagszeitung reported, citing an unidentified member of the company's supervisory board.

Atticus Capital LLC and Children's Investment Fund Management LLP said Sept. 2 they may push for new management in an effort to explore ``all options'' for increasing the company's market value.

Share Buyback

Deutsche Boerse bought back more than 316,000 of its own shares as of Sept. 5, it said in a statement on DGAP newswire.

Siemens advanced 2.42 euros, or 3.5 percent, to 71.26, the biggest gain since July 30. Credit Suisse analysts Simon Smith and Tom Melville gave the stock an ``outperform'' recommendation and a price estimate of 110 euros.

BMW rallied 1.44 euros to 29.02. UBS rated the shares ``buy'' in new coverage and set its price projection at 35 euros.

Munich Re surged 4.99 euros, or 4.9 percent, to 107.87, the steepest gain since Jan. 30. Capital-market turmoil and higher catastrophe claims could halt a two-year decline of reinsurance rates as primary insurers may need to buy more coverage against risks, the world's biggest reinsurer said yesterday.

Crude oil rebounded from a five-month low in New York as the approach of Hurricane Ike delayed the resumption of production in the Gulf of Mexico.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Aareal Bank AG (ARL GY) climbed 1.19 euros, or 7.4 percent, to 17.26, the steepest gain in more than a month. WestLB added the commercial-property lender to its ``mid & small cap focus list'' following the bailout of Fannie Mae and Freddie Mac.

``This is a powerful short-term incentive to focus on Aareal Bank's fundamentals,'' Christoph Bossmann, a Dusseldorf-based analyst, wrote in a note to clients today.

Bilfinger Berger AG (GBF GY) jumped 3.62 euros, or 8 percent, to 48.65, the steepest advance in almost seven months. Goldman Sachs Group Inc. raised its share-price estimate for the country's second-largest builder 14 percent to 55.20 euros.

Celesio AG (CLS1 GY) gained 83 cents, or 3.1 percent, to 27.34 euros, snapping a two-day drop. Europe's biggest drug wholesaler plans to buy 30 to 50 pharmacies in Germany within a year of receiving legal approval, Frankfurter Allgemeine Sonntagszeitung reported, citing Chief Executive Officer Fritz Oesterle.

Fraport AG (FRA GY) climbed 1.79 euros, or 4.4 percent, to 42.32, the steepest advance in more than a month. Wilhelm Bender, chief executive officer of the owner of Frankfurt Airport, told Deutsche Presse-Agentur plans to expand Europe's third-busiest hub aren't in danger of being blocked by lawsuits.

Hochtief AG (HOT GY) surged 4.38 euros, or 8.5 percent, to 56.14, snapping a three-day decline. Goldman added Germany's largest construction company to its ``conviction buy'' list and raised its share-price estimate 3.4 percent to 66.20 euros, saying the stock will benefit from speculation that the builder may be broken up.

RWE AG (RWE GY) rose for the first time in six days, gaining 1 euro, or 1.5 percent, to 68.94. Chief Executive Officer Juergen Grossmann is looking for acquisitions in Germany and abroad, though he doesn't see a ``mega-merger'' with a foreign utility of similar size, according to a Frankfurter Rundschau interview.

To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.