Bloomberg News

German Stocks Retreat on Debt Concern; Deutsche Bank, BMW Slide

October 04, 2011

Oct. 4 (Bloomberg) -- German stocks fell for a third day amid concern the European debt crisis will hurt the economic recovery and that private bondholders face increased losses on Greek debt.

Deutsche Bank AG dropped 4.3 percent after abandoning its 2011 profit forecast and announcing more job cuts. Volkswagen AG, Bayerische Motoren Werke AG and Daimler AG plunged more than 4 percent as carmakers tumbled amid concern that growth is slowing.

The benchmark DAX Index slid 3 percent to 5,216.71 at the 5:30 p.m. close in Frankfurt, extending its three-day slump to 7.5 percent. The gauge fell 25 percent last quarter, its biggest drop since 2002, amid concern the global economy is stalling and Europe’s sovereign-debt crisis is spreading. The broader HDAX Index lost 3.2 percent today.

“Beyond Deutsche Bank, the stocks pulling the DAX down are mainly cyclical,” said Alexander Kraemer, a cross-asset strategist at Commerzbank AG in Frankfurt. “Greece seems to be in the headlines wherever you look, but the underlying problem is that the Greek situation may result in a mild recession in the euro zone and that weighs on cyclical stocks.”

Euro-area finance ministers meeting yesterday considered reshaping the private sector’s 50 billion-euro ($66 billion) involvement in July’s 159 billion-euro rescue. The package included debt exchange and rollover. The talks came after seven countries including Germany, Europe’s largest economy, weighed calling for Greek bond writedowns of as much as 50 percent, two European officials said.

Banks Slide

Deutsche Bank, the country’s biggest lender, fell 4.3 percent to 24.64 euros after the company cut its 2011 profit forecast and announced 500 job cuts. The bank said an indirect tax position weighed on its third-quarter earnings.

Commerzbank, Germany’s second-largest bank, tumbled 4 percent to 1.69 euros, extending a three-day decline to 16 percent. Allianz SE, Europe’s biggest insurer, retreated 2.7 percent to 66.92 euros.

Volkswagen, Europe’s largest automaker, fell 7.1 percent to 88.54 euros amid concern that demand for luxury cars in China is slowing. BMW lost 4.4 percent to 45.04 euros and Daimler plunged 5.7 percent to 30.97 euros.

In Beijing, BMW dealerships are giving markdowns of as much as 19 percent on a 3-series car, while some Mercedes dealers are selling the C-Class Elegance model at 20 percent less than the suggested retail price, according to cheshi.com, a pricing guide tracking more than 3,000 dealers in the country.

Lufthansa AG, Europe’s second-biggest airline, fell 4.3 percent to 8.98 euros. Tony Tyler, chief executive officer of the International Air Transport Association, said that airlines will generate net income equal to 0.8 percent of revenue next year, a margin that may shrink further if economic growth slows to less than 2.4 percent.

HeidelbergCement AG, the world’s third-largest maker of cement, tumbled 9 percent to 24.57 euros as European construction stocks declined.

--Editors: Srinivasan Sivabalan, Will Hadfield

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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