Bloomberg News

German Stocks Decline as Banks Retreat on JPMorgan Loss

May 11, 2012

German stocks declined, with the benchmark DAX (DAX) Index heading for its second weekly drop, as Deutsche Bank AG (DBK) led shares of lenders lower after JPMorgan Chase & Co. (JPM:US) posted a $2 billion trading loss.

Fresenius SE retreated 1.5 percent after announcing a capital increase to fund a planned acquisition. Bayerische Motoren Werke AG (BMW) rose after saying it will open more used-cars outlets in China.

The DAX slid 0.5 percent to 6,486.01 at 3:46 p.m. in Frankfurt. The gauge has lost 1 percent this week as Greek politician struggled to form a government after inconclusive elections. The broader HDAX Index slipped 0.5 percent today.

“JPMorgan’s loss is pushing the market and particularly financial stocks lower today,” said Henrik Henriksen, the chief investment strategist at PFA Pension A/S in Copenhagen, where he helps manage $45 billion. “Greece has become less of a factor as the real contagion risk seems limited.”

JPMorgan Chief Executive Officer Jamie Dimon said the firm suffered the loss after an “egregious” failure in a unit managing risks. The firm’s chief investment office, run by Ina Drew, 55, took positions on synthetic credit securities that may cost an additional $1 billion this quarter or next, Dimon said.

U.S. lawmakers and interest groups favoring tighter restrictions on proprietary trading said JPMorgan’s errors bolster their case.

Greek Political Impasse

Greece’s politicians continued their attempt to form a unity government after Evangelos Venizelos, the socialist Pasok leader, received a mandate from the nation’s president.

The impasse has renewed concerns that Greece may fail to comply with the terms of its two bailouts negotiated since May 2010 and leave the euro.

Meanwhile, Antonis Samaras, leader of Greece’s New Democracy party, said he supports a unity government under the sole condition that it guarantees the nation’s membership of the euro area.

Gross domestic product in the 17-nation euro area will drop 0.3 percent, the European Commission said today, reiterating a February forecast. Greece will have the deepest contraction, with GDP declining 4.7 percent this year.

Spain and Italy will shrink 1.8 percent and 1.4 percent, respectively, the commission said. In 2013, the euro-region economy may expand 1 percent.

Spanish Property Loans

Stocks extended losses after Spain said it will force the country’s banks to increase provisions against losses on real- estate loans by 30 billion euros ($38 billion) and will hire two auditors to gauge all the assets of lenders in the government’s fourth attempt to clean up the financial system.

In China, a report showed that the country’s industrial output rose 9.3 percent in April from a year earlier. That compared with the 12.2 percent median estimate in a Bloomberg News survey of 32 economists and 11.9 percent in March.

Deutsche Bank declined 2.5 percent to 30.44 euros, while Commerzbank AG (CBK), the second-biggest German lender, slipped 1.7 percent to 1.54 euros.

Fresenius SE dropped 1.5 percent to 76.55 euros. The German health-care company said it sold 13.8 million new ordinary shares at 73.50 euros each and raised 1.01 billion euros ($1.3 billion) to finance the planned acquisition of Rhoen-Klinikum AG.

BMW rose 0.7 percent to 66.68 euros. The carmaker said it will open more used-car centers in China to build the brand and expand its customer base in the world’s largest auto market.

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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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $59.77 USD
    • 1.34
    • 2.24%
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