Bloomberg News

German Stocks Decline as Spain Raises Deficit Target, Retail Sales Drop

March 02, 2012

German stocks retreated as Spain raised its budget deficit target and a report showed German retail sales dropped in January.

Metro AG, Germany’s biggest retailer, lost 2.9 percent. Bayer AG fell 1.7 percent. K+S AG (SDF) retreated 1.6 percent, after Societe Generale SA cut its recommendation on the company. Commerzbank AG (CBK) rose 1.2 percent as Goldman Sachs Group Inc. advised buying European bank stocks. Merck KGaA gained 2.6 percent as Exane Finance SE raised its price target.

The DAX Index (DAX) declined 0.3 percent to 6,921.37 at the close of trading in Frankfurt. The benchmark gauge gained 0.8 percent this week. The measure advanced 6.2 percent in February and 17.4 percent so far this year. The broader HDAX Index dropped 0.3 percent today.

Spain raised its budget deficit target for 2012, breaching its commitment with its European partners, as a deepening economic slump hampers efforts to rein in the euro area’s fourth-biggest shortfall. Prime Minister Mariano Rajoy announced a new deficit goal of 5.8 percent of gross domestic product compared with the 4.4 percent target previously agreed with the European Union.

German retail sales unexpectedly declined in January as rising oil prices fueled inflation. Sales, adjusted for inflation and seasonal swings, fell 1.6 percent from December, when they increased 0.1 percent, the Federal Statistics Office said today. Economists had forecast a gain of 0.5 percent, the median of 22 estimates in a Bloomberg News survey showed.

Metro Falls

Metro declined 2.9 percent to 28.40 euros after the retail sales data were published and Commerzbank said the company’s earnings may drop this year.

“We believe 2012 will be a year of flat earnings at best,” Commerzbank’s Juergen Elfers wrote in a report dated March 1. Lower profit “could be a more feasible scenario, while consensus still expects earnings to increase by 5 percent.”

Bayer, Germany’s largest drugmaker, fell 1.7 percent to 55.65 euros.

K+S dropped 1.6 percent to 37.08 euros, as Patrick Lambert, an analyst at Societe Generale SA, cut the company’s shares to “hold” from “buy” with a 12-month target price of 40.00 euros per share. Morgan Stanley said the company may cut its 2012 guidance when it reports full-year earnings on March 15.

Commerzbank rose 1.2 percent to 1.96 euros after Goldman raised its recommendations on banks to “overweight” from “neutral.” The European Central Bank’s long-term refinancing operation has improved cash supply for banks, analysts, including Matthieu Walterspiler, wrote in a report.

Merck gained 2.6 percent to 80.74 euros, as Exane Finance SE raised its price target to 82 from 73 euros.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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