Bloomberg News

German Stocks Drop to a Five-Month Low; EON Falls

June 05, 2012

German stocks declined, pushing the benchmark DAX Index to a five-month low, as a report showed euro-area manufacturing and services output shrank in May for a fourth month.

EON AG, Germany’s biggest utility, dropped 1.2 percent after saying it may lose millions of euros due to “irregularities” by a former employee. MAN SE (MAN) made the biggest gain in more than three years after Volkswagen AG raised its stake in the company.

The DAX fell 0.2 percent to 5,969.4 at the close in Frankfurt, its lowest since Dec. 30. The gauge pared an earlier drop of as much as 1.1 percent after a report showed U.S. services industry expanded at a faster pace than estimated. The DAX has lost 17 percent since its 2012 high on March 16 amid growing concern that Greece will be forced to leave the euro area. The broader HDAX Index slid 0.1 percent.

“The DAX has been an island” of safety during volatility in other equity indexes, said Duarte Caldas, a market strategist at IG Markets in Lisbon. “In the last few days, with the slowdown in the US and China, we are seeing some negative catchup.”

Euro-area services and manufacturing output shrank in May for a fourth month, according to a composite index based on a survey of purchasing managers in both industries, London-based Markit Economics said. The index dropped to 46 from 46.7 in April. The reading is the lowest since June 2009. A level below 50 indicates contraction.

U.S. Service Economy

In the U.S., the Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the world’s largest economy, rose to 53.7 in May from the prior month’s 53.5, the Tempe, Arizona-based group said today. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Readings above 50 signal expansion.

Finance ministers and central-bank governors from the world’s leading economies agreed to coordinate their response to Europe’s financial crisis on a conference call that dealt with Spain and Greece.

Group of Seven officials said they will work together to help both euro-area countries place their public finances on a sustainable footing, Japanese Finance Minister Jun Azumi told reporters in Tokyo following the call today. Azumi said he urged European leaders to do more to address investors’ concerns about the region’s finances.

Spanish Bank Rescue

Spain called for outside funds for the first time to battle the financial crisis as Budget Minister Cristobal Montoro said European institutions should help shore up the nation’s lenders.

In an interview with Spanish broadcaster Onda Cero today, Montoro ruled out a full rescue for the euro region’s fourth- biggest economy.

A survey in Germany showed Chancellor Angela Merkel is consolidating her political position. Support for Germany’s Pirate Party fell one percentage point to 7 percent as Merkel’s governing Christian Democratic bloc gained one percentage point to 34 percent, according to a weekly poll.

The Social Democratic Party would attract 32 percent of votes if national elections were held today, the survey by INSA- Meinungstrend for Germany’s Bild newspaper showed.

EON Sees Losses

EON dropped 1.2 percent to 14.24 euros, the lowest since Sept. 13. The stock has fallen for seven consecutive days, its longest stretch of declines since August.

“EON Energy Trading SE in Dusseldorf has detected some irregularities of a single trader,” Georg Oppermann, a spokesman for the power and natural-gas company, said yesterday. “We expect only minor financial impacts on our portfolio in the lower double-digit million euro range.” he said.

Deutsche Boerse AG (DB1) fell 1.9 percent to 36.58 euros, the lowest since Oct. 4.

Deutsche Lufthansa lost 1.7 percent to 8.06 euros.

MAN, the German truckmaker owned by Volkswagen, rallied 9.1 percent to 85 euros, the biggest jump since April 2009. Volkswagen raised its stake in the company to push a three-way truckmaking alliance between MAN, Scania AB and its own commercial-vehicles unit.

Volkswagen increased its voting rights to 75.03 percent from 73.76 percent previously, the Wolfsburg, Germany-based carmaker said.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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


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