Bloomberg News

German Stocks Retreat for Fourth Day; Deutsche Bank Declines

November 17, 2011

Nov. 17 (Bloomberg) -- German stocks retreated for a fourth day, the longest losing streak in more than two months, as borrowing costs increased at auctions of Spanish and French bonds, fueling concern the region’s debt crisis is spreading.

Deutsche Bank AG and Commerzbank AG followed yesterday’s declines in U.S. financial shares after Fitch Ratings said American banks face a “serious risk” of deteriorating creditworthiness if Europe’s crisis deepens. Air Berlin Plc dropped 2.1 percent after the airline said profit declined.

The DAX Index retreated 1.1 percent to 5,850.17 at the close in Frankfurt, for the longest falling streak since Sept. 6. The gauge has plunged 22 percent from this year’s high on May 2 amid concern global economic growth is slowing and policy makers are struggling to contain Europe’s fiscal crisis. The broader HDAX Index also lost 1.1 percent today.

“Markets remain very critical,” said Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf. “The best thing you can do at the moment is to keep your exposure low. The situation in peripheral countries is worsening every day and has a very negative effect on the real economy and investors’ sentiment.”

Spain sold 3.56 billion euros ($4.8 billion) of a new benchmark 10-year bond today, compared with a maximum target of 4 billion euros. The average yield was 6.975 percent, compared with 5.433 percent when securities of a similar maturity were sold on Oct. 20, and 6.69 percent on the secondary market at 10:30 a.m. Demand was 1.54 times the amount sold, compared with 1.76 when 10-year securities were sold in October.

French Sale

France sold 3.33 billion euros of July 2016 notes at an average yield of 2.82 percent, up from 2.31 percent at a sale on Oct. 20. The spread between French and German 10-year yields widened to as much as 203 basis points today.

Germany’s debt level is a “cause for concern,” Luxembourg Prime Minister Jean-Claude Juncker told General-Anzeiger. “Germany has a higher debt than Spain,” Juncker was quoted as telling the Bonn-based newspaper. “The only thing is that no one here wants to know about that.”

Deutsche Bank and Commerzbank, Germany’s biggest banks, fell 3.7 percent to 27.29 euros and 4.3 percent to 1.46 euros, respectively. The Commerzbank price was the lowest since at least 1992.

U.S. Bank Outlook

“Unless the euro-zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” Fitch said yesterday in a statement. Even as U.S. banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said, without explaining what it meant by contagion.

Air Berlin slipped 2.1 percent to 2.60 euros, the first decline in three days. The airline said third-quarter net income fell to 30.2 million euros from 135.9 million euros and said it is unlikely to post positive earnings before interest and taxes this year.

Rheinmetall AG fell 4.5 percent to 33.10 euros, the lowest price since Oct. 4, as Commerzbank downgraded the maker of KS Kolbenschmidt engine pistons to “hold” from “buy.”

ThyssenKrupp AG, Germany’s largest steelmaker, lost 5.9 percent to 18.73 euros and Salzgitter AG, the second-largest, slipped 2.9 percent to 37.69 euros. Austrian rival Voestalpine AG cut its profit outlook for the full year, citing a “difficult economic environment.”

--Editor: 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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