Bloomberg News

German Stocks Drop as Plosser Says Bond Buying May Fail

September 26, 2012

German stocks fell the most in almost eight weeks after Federal Reserve Bank of Philadelphia President Charles Plosser said the latest round of quantitative easing probably won’t boost growth or employment in the U.S.

Deutsche Bank AG (DBK) sank 6.5 percent as investors disagreed over how Germany’s biggest bank should raise capital. Volkswagen AG (VOW) dropped 3.8 percent and Daimler AG (DAI) slid 3.3 percent. Banks and carmakers dropped the most of the 19 industry groups in the Stoxx Europe 600 Index. (SXXP)

The DAX Index (DAX) lost 2 percent to 7,276.51 at the close of trading in Frankfurt, its biggest drop since Aug. 2. The benchmark has still rallied 22 percent from this year’s low on June 5 as European Central Bank policy makers approved an unlimited bond-buying program and the Fed started a third round of asset purchases. The broader HDAX Index fell 2 percent today.

“There has been underlying nervousness for the past few days,” Chris Beauchamp, a market analyst at IG in London, said in a telephone interview. “Plosser’s comments that bond buying might fail and discontent in Spain are leading to risk aversion taking hold again.”

The number of shares changing hands in companies listed on the DAX was 28 percent higher than the 30-day average today, according to data compiled by Bloomberg.

Plosser said late yesterday that the Fed’s bond-buying program will probably fail to stimulate growth or hiring and may jeopardize the central bank’s credibility.

The Federal Open Market Committee said on Sept. 13 that it will undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets improve. Policy makers have turned to unconventional tools to attack a jobless rate stuck above 8 percent since February 2009.

Stimulus Effectiveness

“The effectiveness of quantitative easing is wearing off,” Petra Grafin von Kerssenbrock, a technical analyst at Commerzbank AG (CBK) in Frankfurt wrote in a message. “The announcement of a third round of quantitative easing should already be incorporated in the most recent price movement.”

Deutsche Bank slumped 6.5 percent to 30.67 euros. Some investors favor the lender’s plan to avoid a share sale while others oppose it, said co-Chief Executive Officer Anshu Jain.

“I’m getting two responses,” Jain said yesterday at a conference hosted by Bank of America Corp. in London. Jain said he has met with investors after unveiling the firm’s strategy on Sept. 11 and that those who “have been with us” told Deutsche Bank “without exception that they applaud management’s commitment to grow this capital organically.”

Commerzbank, Germany’s second-largest lender, retreated 5.7 percent to 1.42 euros.

Carmakers Fall

Volkswagen, Europe’s biggest carmaker, slipped 3.8 percent to 146.40 euros. Daimler, the world’s third-largest maker of luxury vehicles, fell 3.3 percent to 38.16 euros. Bayerische Motoren Werke AG (BMW), the biggest manufacturer of luxury cars, lost 2 percent to 57.62 euros.

Infineon Technologies AG (IFX) dropped 3.4 percent to 4.94 euros. Jefferies Group Inc. downgraded its recommendation on the shares to underperform, the equivalent of sell, from hold. The stock slid more than 6 percent yesterday after Europe’s second-biggest semiconductor maker said sales and profit would decline in the three months through December.

Deutsche Lufthansa AG (LHA) lost 2.1 percent to 10.70 euros after Europe’s biggest airline by sales was replaced by EasyJet Plc on Morgan Stanley’s best ideas list.

SAP AG, the world’s largest maker of business-management software, fell 2.8 percent to 55.11 euros. Karl Liebstueckel, the head of the German-speaking SAP user association DSAG said that customers want more functions on SAP’s core system, according to a report in Handelsblatt.

Fresenius Medical Care AG advanced 2.2 percent to 56.54 euros. The world’s biggest provider of kidney dialysis expects to spend the remaining $300 million left in its $1.8 billion acquisition budget, according to Chief Financial Officer Michael Brosnan.

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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