Bloomberg News

German Stocks Drop on Greek Downgrade, U.S. Economy; VW Falls

June 02, 2011

June 2 (Bloomberg) -- German stocks fell to a six-week low as Moody’s Investors Service raised Greece’s default risk to 50 percent and a bigger-than-forecast drop in U.S. factory orders fueled concern that the world’s largest economy is faltering.

Daimler AG led declines in European carmakers. ThyssenKrupp AG, Germany’s largest steelmaker, fell with metal prices. Brenntag AG lost 1.6 percent as the company said it is seeking loans to refinance debt.

The benchmark DAX Index lost 2 percent to 7,074.12 at the 5:30 p.m. close in Frankfurt, while the broader HDAX Index fell 1.9 percent. German stocks retreated yesterday amid slowing European and Chinese manufacturing and after a private report showed companies in the U.S. added fewer workers to payrolls last month than economists had forecast.

“The doubts over the strength of the economic upturn and the most recent downgrade of debt-stricken Greece by Moody’s shaped sentiment leading to declines,” said Anita Paluch, a sales trader at ETX Capital in London.

Moody’s downgraded Greece to Caa1 from B1, putting it on a par with Cuba, according to a report published late yesterday. The move came after policy makers considered asking investors to reinvest in new Greek debt when their existing bonds mature.

European Central Bank President Jean-Claude Trichet said governments should consider setting up a finance ministry for the 17-nation currency region as the bloc struggles to contain a region-wide sovereign debt crisis.

U.S. Factory Orders

A U.S. report today showed orders placed with factories fell in April by the most in almost a year as demand for airplanes waned and Japan’s earthquake restrained auto-related supplies. Bookings for manufacturers’ goods dropped 1.2 percent after a revised 3.8 percent gain in March, according to figures from the Commerce Department.

German stocks maintained their losses today after a Labor Department report showed that more Americans than forecast filed applications for unemployment benefits last week, signaling the labor market is struggling to pick up. The data comes before tomorrow’s monthly government payroll report that may show a drop in the number of people hired.

Daimler, the world’s second-biggest maker of luxury cars, lost 2.4 percent to 47.33 euros. Volkswagen AG, Europe’s largest carmaker, declined 1.1 percent to 122.95 euros. Auto-industry stocks retreated across Europe today, falling 2 percent as a group.

U.S. sales of cars and light trucks dropped to a seasonally adjusted annual rate of 11.8 million last month, Autodata said, the lowest pace since September.

ThyssenKrupp, Salzgitter

ThyssenKrupp lost 1.9 percent to 31.96 euros as aluminum, copper, lead, nickel, tin and zinc all fell on the London Metal Exchange. Salzgitter AG retreated 1.2 percent to 49.54 euros.

EON AG, Germany’s biggest utility, tumbled 1.6 percent to 19.07 euros, while RWE AG, the second-largest, lost 2.2 percent to 39.24 euros. Germany’s accelerated nuclear phase-out will put pressure on power networks and could disturb the supply as soon as next week, according to Matthias Kurth, who heads the Federal Network Agency, the Rheinische Post reported. Kurth told the newspaper he doesn’t exclude sporadic power failures.

Brenntag slipped for the first time in five days, falling 1.6 percent to 83.37 euros. The chemicals company that sold shares to the public last year plans to borrow about 1.8 billion euros ($2.6 billion) to refinance debt at a lower cost, two people familiar with the situation said.

--Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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