Bloomberg News

German Stocks Decline as Euro-Area Output Shrinks

March 05, 2012

German stocks fell for a second day as euro-area services and manufacturing output shrank more than estimated in February, and China cut its target for economic growth to the lowest in eight years.

Salzgitter AG declined 5.5 percent after saying it may not match 2011 results. HeidelbergCement AG (HEI) lost 3 percent after ING Groep NV cuts its recommendation. Gagfah SA (GFJ) jumped 28 percent after settling a sales dispute with the city of Dresden.

The DAX Index (DAX) retreated 0.5 percent to 6,886.73 at 4:12 p.m. in Frankfurt, as an index based on a survey of purchasing managers in the euro-area dropped more than expected, extending a decline of 0.3 percent on March 2. The benchmark gauge has still gained 17 percent so far this year. The broader HDAX Index also lost 0.5 percent today.

Stocks declined “mainly because of the weak PMI numbers across Europe -- with the exception of Germany -- but for which we were penalized in line with the other markets,” said Matthias Jasper, head of equities at Wgz Bank AG in Dusseldorf, Germany. “After the recent strong performance over the last six to eight weeks, people are getting uncertain watching from the sidelines.”

A gauge of European services and manufacturing missed economists’ estimates in February as the euro-region’s economy struggled to recover from a contraction in the fourth quarter. The euro-area composite index dropped to 49.3 from 50.4 in January, London-based Markit Economics said today. That’s below the 49.7 forecast by economists surveyed by Bloomberg, matching the initial figure published on Feb. 22.

China Growth Forecast

China cut its 2012 growth target to 7.5 percent, according to a transcript of Premier Wen Jiabao’s address to the National People’s Congress. It pared the target from an 8 percent goal in place since 2005. The government will also aim for inflation of about 4 percent this year, unchanged from its 2011 goal.

Investors are awaiting a deadline on March 8 to see how many of Greece’s private creditors agree to a writedown, which will decide the success of the 106 billion-euro ($140 billion) debt swap. Euro-area finance ministers will hold a teleconference on March 9 to review the deal’s outcome.

German services expanded at a slower pace in February compared with a month earlier, a second estimate confirmed today. An index based on a survey of purchasing managers in the industry fell to 52.8 from 53.7 in January, Markit Economics said. That’s higher than the earlier estimate of 52.6. A reading above 50 indicates expansion.

Salzgitter Slides

Salzgitter AG (SZG) tumbled 5.5 percent to 42.84 euros after the German steelmaker said Europe’s debt crisis makes it “challenging” to match 2011 results and that it was “impossible” to give a detailed earnings forecast.

HeidelbergCement (HEI) declined 3 percent to 41.34 euros after it was cut to “hold” from “buy” at ING.

Bank stocks declined, led by Deutsche Bank AG (DBK), which fell 1.9 percent to 35.17 euros and Commerzbank AG (CBK), which dropped 3.2 percent to 1.90 euros. Germany’s second-biggest bank said it will boost core Tier 1 capital by 776 million euros in the first half after swapping hybrid capital instruments for new shares.

Commerzbank is exchanging about 361 million new shares for debt securities with an aggregate principal amount of 965 million euros, the Frankfurt-based lender said today. The swap, announced Feb. 23, will boost after-tax earnings by 87 million euros in the period.

SMA Solar Falls

SMA Solar Technology AG (S92), Germany’s biggest solar equipment company by market value, lost 3.3 percent to 34.22 euros after forecasting declining sales in 2012 on government reductions in subsidies.

QSC AG (QSC) slid 6.6 percent to 2.35 euros after the broadband network operator’s full-year revenue missed analysts’ estimates.

Gagfah, a real estate management firm, soared 28 percent, its biggest-ever intraday move, to 5.60 euros after saying it reached a settlement with the City of Dresden on a sales dispute.

The agreement was reached after Gagfah sued Dresden in June over its claim that the company broke a sales agreement. Gagfah’s counterclaim followed Dresden’s decision to sue the company for 1.08 billion euros in April.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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