German Stocks Rally on Rescue Plan; Banks, Steelmakers Advance

By Stefanie Haxel

Oct. 13 (Bloomberg) -- German stocks rebounded from the steepest weekly drop on record, led by banks, after governments in Europe agreed on measures to shore up financial markets.

Commerzbank AG, Germany's second-largest lender, rallied 16 percent and Hypo Real Estate Holding AG surged 37 percent. At a summit chaired by French President Nicolas Sarkozy, leaders of the 15 countries using the euro agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat. The German government said it will provide as much as 500 billion euros ($681 billion) to bolster the banking system. ThyssenKrupp AG and Salzgitter AG, the country's biggest steelmakers, both added more than 10 percent.

The DAX Index increased 301, or 6.6 percent, to 4,845.31 as of 2:07 p.m. in Frankfurt. A close at this level would mark the steepest one-day gain since March 2003. DAX futures expiring in December soared 8.5 percent to 4,880. The HDAX Index of the country's 110 biggest companies rose 6.9 percent to 2,438.72.

``There's relief everywhere,'' said Roger Peeters, an analyst at Close Brothers Seydler Research AG in Frankfurt. ``Positive news in terms of this rescue package is being rewarded again. When the U.S. package finally passed the House of Representatives, it had no lasting impact. Now, investors dare to buy stocks again,'' he said in a Bloomberg Television interview.

The DAX Index tumbled 22 percent last week on concern the deepening credit crisis will drag the global economy into recession, overshadowing interest-rate cuts by central banks in the U.S., Europe and Asia. The measure is down 40 percent this year as credit losses and asset writedowns at financial firms worldwide topped $600 billion.

`Restore Confidence'

Commerzbank surged 1.51 euros to 11.21. Hypo Real Estate, the commercial-property lender that had to be bailed out by the government, gained 1.52 euros to 5.65. Deutsche Bank AG, the country's largest bank by assets, advanced 2.81 euros, or 9 percent, to 34.04.


Chancellor Angela Merkel's government pledged 400 billion euros in loan guarantees, provided as much as 80 billion euros to recapitalize banks in distress and set aside another 20 billion euros in its budget to cover potential losses from loans.

Money-market rates in Europe declined after policy makers offered banks unlimited dollar funding and European governments pledged to take ``all necessary steps'' to shore up confidence among lenders.

``We see the rescue package positively as it should help to restore confidence among banks and to bolster weak banks' capital base,'' Equinet AG analyst Philipp Haessler in Frankfurt wrote in a note to clients today.

Steelmakers

ThyssenKrupp, Germany's largest steelmaker, gained 2.42 euros, or 16 percent, to 17.92. Salzgitter, the second-biggest, added 7 euros, or 14 percent, to 46.89. Steel trader Kloeckner & Co. SE climbed 2.42 euros, or 22 percent, to 13.57.

Metals and mining stocks were among the best performers in Europe today after government pledges of support for the banking system eased concern a global economic slump would curb demand for materials used in cars and buildings.

Infineon Technologies AG, Europe's second-largest chipmaker, advanced 40 cents, or 15 percent, to 3.15 euros. The company's memory-chip division Qimonda AG agreed to sell a 35.6 percent stake in Taiwan's Inotera Memories Inc. for $400 million in cash to U.S. competitor Micron Technology Inc.

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

Air Berlin Plc (AB1 GY) climbed for a second day, adding 11 cents, or 3.7 percent, to 3.06 euros after Europe's third-largest discount airline said it's in talks about a potential merger with German competitor TUIfly.

Bayerische Motoren Werke AG (BMW GY) rose 1.17 euros, or 6 percent, to 20.80, poised for the steepest gain in three weeks. The world's largest maker of luxury cars stuck to its forecast for record car sales and a profit margin of at least 4 percent, Frankfurter Allgemeine Sonntagszeitung reported, citing Chief Executive Officer Norbert Reithofer.

Fielmann AG (FIE GY) increased 2.86 euros, or 6.7 percent, to 45.58. Exane BNP Paribas rated Europe's largest chain of optical stores ``outperform'' in new coverage and set its share- price estimate at 56 euros.

Fresenius Medical Care AG (FME GY) climbed 2.25 euros, or 7.2 percent, to 33.67 as UBS AG raised its recommendation for the world's biggest provider of kidney dialysis to ``buy'' from ``neutral.''

ProSiebenSat.1 Media AG (PSM GY) rallied 79 cents, or 25 percent, to 4 euros, on course for the biggest gain since February 2002. Germany's largest private broadcaster purchased a 67.6 percent stake in online news company Webnews.de to expand its Internet business.

TUI AG (TUI1 GY) climbed 1.24 euros, or 14 percent, to 10.005, poised for the steepest advance in more than five years. The owner of Europe's largest travel company agreed to sell its Hapag-Lloyd shipping unit for more than some analysts had estimated.

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