Frankfurt stocks near 4-year high

German stocks were edging up towards multiyear highs on Thursday, while Italian stocks fell sharply amid domestic political tensions, in a stark example of the contrasting market fortunes of eurozone member states.

Germany’s benchmark Xetra Dax was up 1 per cent at 7,526.62, approaching its highest level since it closed at 7,566 in January 2008.

Bayer led gains, profiting from news about several recent approvals for its products in the European market. The shares rallied 4.1 per cent to €73.02.

Pharmaceutical rival Merck also gained as analysts at JPMorgan raised their price target on the share price from €87 to €97, with a “neutral” rating. The shares climbed 2.6 per cent to €105.75.

ThyssenKrupp followed suit, as investors cheered a board shake-up at Germany’s biggest steelmaker. The shares rallied 2.5 per cent to €16.45.

Daimler gained on news that the carmaker will sell part of its stake in EADS, the aerospace company, to the German state-owned bank KfW. EADS on Wednesday announced the biggest shake-up to its corporate governance in the company’s history. The shares rose 1.3 per cent to €38.68

Michael Hewson, senior market analyst at CMC Markets, cautioned whether the overall rally was sustainable, calling the recent run “an inertia rally” amid little negative news.

“When you look at the economies of various countries and you look at their stock markets, it’s not like looking in the mirror,” he said.

“I’m scratching my head and saying this picture doesn’t look right. At some point equity markets and company valuations have to reflect the countries they are working in.”

In Italy investors took fright sending the benchmark FTSE MIB falling as much as 1.5 per cent after Silvio Berlusconi said the country was standing on the “edge of the abyss”.

The index recovered some of the initial losses and was trading down 0.9 per cent at 15,810.38 at midday.

Adrian Cattley, Europe equity strategist at Citi, said: “Berlusconi sabre-rattling shouldn’t come as too much of a surprise even if it wasn’t expected today. Him doing something off the wall is a bit de rigueur.”

The wider FTSE Eurofirst300 continues to trade at a 2012 high, and gained 0.4 per cent to 1,128.70 on Thursday.

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