Bloomberg News

German Stocks Fall Amid France-German Split on Crisis Solution

October 20, 2011

Oct. 20 (Bloomberg) -- German stocks retreated, snapping a two-day rally, as France and Germany split over Europe’s rescue plan before a finance ministers’ meeting in Brussels tomorrow.

ThyssenKrupp AG, Germany’s biggest steelmaker, fell with metal prices. EON AG and RWE AG lost more than 5 percent as Kepler Equities downgraded Germany’s largest utilities. Metro AG limited losses after reiterating it will exceed 2010 earnings this year.

The benchmark DAX Index dropped 2.5 percent to 5,766.48 at the close in Frankfurt. The measure has still rallied 14 percent from this year’s low on Sept. 12 amid speculation policy makers will find a solution to Europe’s debt crisis. The broader HDAX Index also retreated 2.5 percent today.

“The impasse in German-French talks seems to have doused the optimism prevailing in the markets so far,” said Anita Paluch, a senior sales trader at Gekko Global Markets Ltd. in London. “Unrealistic expectations regarding a wonder solution to the debt problems, which is a complicated issue, are what has led to increased volatility as investors over-responded to every political piece of news.”

Euro-area leaders will meet on Oct. 23 in Brussels, with disagreement over the European Central Bank’s role threatening to hinder progress on a comprehensive strategy to end the debt crisis. German Chancellor Angela Merkel this week sought to lower expectations, even as Group of 20 finance chiefs set the meeting as the deadline for action.

Persisting Differences

French President Nicolas Sarkozy flew to Frankfurt for a meeting last night with Merkel, ECB President Jean-Claude Trichet and International Monetary Fund Managing Director Christine Lagarde. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated the gathering failed to resolve differences.

ThyssenKrupp lost 4.6 percent to 19.28 euros as aluminum, copper, lead, nickel, tin and zinc all dropped on the London Metal Exchange. Competitor Salzgitter AG slipped 1.2 percent to 37.44 euros.

EON tumbled 5.8 percent to 16.40 euros after Kepler cut its recommendation on the stock to “reduce” from “buy.” The brokerage also downgraded RWE to “reduce” from “buy,” sending the shares 5.2 percent lower to 28.75 euros.

Deutsche Bank AG dropped 5.5 percent to 26.03 euros, erasing yesterday’s advance. Germany’s biggest bank lost a bid to reclassify $2.4 billion in claims on Lehman Brothers Holdings Inc. as a judge denied a request to force the defunct firm to upgrade their value.

Commerzbank AG fell 2.9 percent to 1.59 euros as banking shares posted the worst performance among 19 industry groups in the benchmark Stoxx Europe 600 Index today.

Metro, Germany’s biggest retailer, added 1 percent to 32.40 euros for the best performance in the DAX. Chief Executive Officer Eckhard Cordes reiterated that the company’s earnings before interest and taxes this year will exceed last year’s 2.4 billion euros ($3.3 billion).

--Editors: Srinivasan Sivabalan, 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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