European stocks may have had a slow start to the year, but in the closing months of 2013, they're catching up to their American counterparts. Germany's DAX (DAXINDICES: ^DAX ) gained ground this week with a 0.7% gain, bringing its year-to-date total in excess of 18% growth. It's been a good run for the DAX during the past few months, and even the resilient yet hard-pressed German economy, under siege from Europe's lingering recessionary woes, is showing signs of progress.
But can German stocks like Bayer (NASDAQOTH: BAYRY ) and Deustche Telekom (NASDAQOTH: DTEGY ) continue their bounce into the end of the year and 2014? Let's catch up on the latest from across the Atlantic.
Overcoming Europe's slog
Germany's Federal Statistics Office showed stronger-than-projected economic growth from Europe's leading economy today. While the country's GDP rose by only an earlier-reported 0.3% during the third quarter, capital investment and domestic demand both grew strongly. This helped Germany count more on consumption and investment at home rather than abroad for its economic fortunes.
The good news has come despite the German economy's reliance on exports, which have been weighed down by Europe's sluggishness. The eurozone is Germany's top trading partner, and the ongoing troubles of leading economies such as Italy, Spain, and even France -- Europe's second-largest economy that faltered in the third quarter -- have hurt Germany's growth plans.
While falling exports aren't good for Germany's top international firms like Bayer, the country's business morale has been on a tear. German think tank Ifo said that business morale rose to its highest in more than a year in its recent reading in November, according to a report from Reuters. Berlin expects up to 1.5% economic growth next year, and if that comes to pass, businesses could be ready for an upswing by catering to domestic German consumption.
For many German companies, however, playing the international game is still the way to go. That's certainly true for Bayer, a giant in the health-care and pharmaceuticals landscape. The company this week picked up Japanese regulatory approval for its eye-care drug Eylea to treat a type of macular edema. Eylea's been a quick riser for Bayer, which makes money on the drug's sales outside of the U.S. through its partnership with drug developer Regeneron. (NASDAQ: REGN )
Although Eylea's only been on the market for a couple years, Bayer pulled in $160 million in sales of the drug through its first half of 2013 -- not bad for a drug that it shares revenue on, with the U.S. market going to Regeneron entirely.
Deutsche Telekom's looking internationally, as well, although it's only advancing to Eastern Europe. The company this month inked a deal to purchase GTS Central Europe, a communications provider in Poland, Hungary, and other nearby nations. It wasn't a cheap deal for Deutsche at 546 million-$730 million euros -- but the company's investment looks to bulk up its reach across the continent before a recovery returns. When Europe turns around from its current economic woes, moves like this will help Deutsche Telekom capitalize.
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