German stocks declined, snapping four days of advances as Spain said its recession would continue into next year, and the yield on 10-year bonds surged.
RWE AG (RWE) slid after UBS AG advised selling the shares. Deutsche Post AG (DPW) fell after Handelsblatt reported that it may face a writedown after mail-order company Neckermann filed for bankruptcy. Solarworld AG (SWV), Germany’s biggest solar-panel maker, jumped 9.5 percent.
The DAX Index (DAX) lost 1.9 percent to 6,630.02 in Frankfurt. The measure still posted a 1.1 percent increase this week, its second successive gain as companies reported better-than- expected quarterly earnings. The broader HDAX Index fell 1.7 percent today.
Spain’s recession will extend into next year as the region of Valencia prepared to seek a rescue from the central government and European finance ministers approved the bailout of Spanish banks, Budget Minister Cristobal Montoro said after the Cabinet met today in Madrid. Gross domestic product will fall 0.5 percent in 2013 instead of rising 0.2 percent as the government predicted April 27, Montoro said.
“European markets have taken a turn for the worse today, smacked by headlines out of Spain,” Ishaq Siddiqi, a market strategist at Etx Capital in London, wrote. “Although EU finance ministers have adopted the Spanish bank bailout, sentiment has been rattled by Spain painting a bleaker outlook than previously by downgrading its economic growth forecasts.”
The Spanish 10-year yield earlier rose eight basis points to 7.09 percent, pushing the spread over equivalent German bunds 12 basis points wider to 591 basis points, the most since Bloomberg began compiling the data in 1993.
RWE fell 6 percent to 31.87 euros. UBS cut its recommendation on the shares to sell from neutral, saying the power supplier may have “zero earnings growth” until 2020 due to the negative generation outlook.
EON AG slid 4 percent to 17.04 euros. Germany’s biggest utility halted its Oskarshamn-2 nuclear reactor in Sweden yesterday, the Dusseldorf-based company said today in a filing to the Nord Pool Spot AS power exchange.
The facility stopped because of “problems with one of the auxiliary power diesel generators,” EON said.
Deutsche Post lost 1.9 percent to 14.65 euros. Europe’s largest mail carrier may face a double-digit million-euro writedown in 2012 after Neckermann filed for bankruptcy, Handelsblatt reported. Deutsche Post spokesman Sebastian Steffen said it’s too early to comment on the effect of the bankruptcy.
Solarworld gained 9.5 percent to 1.15 euros. Chief Executive Frank Asbeck will relinquish his pay until the company is profitable again, he told Handelsblatt.
European Aeronautic, Defence and Space Co. jumped 4.1 percent 28.79 euros. Goldman Sachs Group Inc. raised its recommendation on the shares to buy, saying the stronger dollar is a “significant” new positive for EADS on top of a “robust up-cycle” in aerospace.
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