Bloomberg News

German Stocks Decline as Utilities Lead Drop; Lufthansa Climbs

August 30, 2011

Aug. 30 (Bloomberg) -- German stocks fell, with the DAX Index extending its biggest monthly drop in almost nine years, as European confidence in the economic outlook plunged the most since December 2008 and confidence among U.S. consumers slid.

EON AG and RWE AG, Germany’s biggest utilities, led declining shares. Henkel AG’s preferred shares and Bayer AG both retreated 1.3 percent. Deutsche Lufthansa AG rose 1.9 percent after saying it expects to increase profit this year.

The DAX fell 0.5 percent to 5,643.92 at the 5:30 p.m. close in Frankfurt. The measure has tumbled 22 percent in August, its biggest monthly retreat since September 2002, as European and U.S. economic reports that trailed forecasts added to concern that the global economic recovery is at risk. The broader HDAX Index decreased 0.3 percent today.

“We’re still not out of the woods,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn. “I still see a bit more nervous times in the weeks and months to come. We still have a chance to go back to a 6,000 level at the year end, but we could test new lows of 5,300 to 5,150 in the DAX.”

An index of executive and consumer sentiment in the euro area fell to 98.3 in August from a revised 103 in July, the European Commission said today. That’s the lowest since May 2010. Economists had forecast a reading of 100.2, according to the median of 29 estimates in a Bloomberg News survey.

U.S. Confidence

In the U.S., the Conference Board’s consumer-confidence index slumped to 44.5, its weakest since April 2009, from a revised 59.2 reading in July. It was the biggest point drop since October 2008. Economists had predicted the gauge would fall to 52 in August, according to the median forecast in a Bloomberg News survey.

The Federal Reserve will release minutes from its most recent policy meeting after European markets close today. Chairman Ben S. Bernanke said on Aug. 26 in Jackson Hole, Wyoming, that the economy isn’t deteriorating enough to warrant any immediate stimulus and that the central bank still has tools to stimulate growth.

European governments will seal an agreement on collateral for Greece’s second aid package by mid-September, Luxembourg Prime Minister Jean-Claude Juncker said late yesterday in Brussels. Euro-area governments will need to transfer additional sovereign functions to the European Union if they want to establish an economic government, he told German state broadcaster ZDF in an interview.

EON, RWE Fall

EON and RWE lost 2.5 percent to 14.72 euros and 2.8 percent to 25.23 euros, respectively. Germany’s planned boost in renewable energy generation is “a major challenge” to the power network as the country shuts its nuclear reactors, according to the national grid operator.

“We’re welcoming the increase in renewables but their volatility is a major challenge,” Matthias Kurth, the head of the Bundesnetzagentur, the federal grid operator, said today at a renewable energy conference in Berlin. The fluctuating “fever curve” in renewable generation “is here to stay,” and burdens the grid, he said.

Preferred shares of Henkel, the maker of industrial adhesives, Dial soap and Soft Scrub cleaners, lost 1.3 percent to 40.09 euros, while Bayer, the Leverkusen-based drug and chemical maker, fell 1.3 percent to 43.89 euros.

Lufthansa, Europe’s second-largest airline, gained 1.9 percent to 11.16 euros, the best performance in the DAX today. Chief Executive Officer Christoph Franz said the company aims to increase profit this year as fuel hedging and income from maintenance and catering units leave it better placed than competitors.

“We are relatively stable in an unstable industry,” Franz said last night at a briefing in Frankfurt.

--Editors: Andrew Rummer, Will Hadfield

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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