June 5 (Bloomberg) -- German stocks dropped after European Central Bank President Jean-Claude Trichet said the global boom in financial markets may be unsustainable.

E.ON AG, RWE AG and Deutsche Lufthansa AG paced the decline.

The DAX Index sank 56.96, or 0.7 percent, to 7919.83. The HDAX Index of the country's 110 biggest companies decreased 24.64, or 0.6 percent, to 4081.39. DAX futures expiring in June shed 87.5, or 1.1 percent, to 7903.5 as of 5:49 p.m. in Frankfurt.

``The present state of global finance -- where we are observing a level of risk pricing which is historically low --is not necessarily sustainable in the long run,'' Trichet said in a speech at a conference in Cape Town, South Africa, today.

The European Central Bank will probably raise borrowing costs tomorrow to 4 percent, according to all 52 economists surveyed by Bloomberg News. The benchmark 10-year note's yields in the U.S. reached a nine-month high as investors reduce bets the Federal Reserve will cut borrowing costs this year.

``We are entering a phase where higher interest rates start weighing on equity markets,'' said Matthias Joerss, a strategist at Sal. Oppenheim Jr. & Cie. in Frankfurt.

E.ON, the world's largest utility by sales, declined 1.58 euros, or 1.3 percent, to 120.17 euros. RWE, Germany's second- biggest utility, slipped 1.06 euros, or 1.3 percent, to 83.14 euros, pacing a decline by utilities, among the most sensitive to rising rates.

Dividend Yields

Rising rates decrease the attractiveness of dividend yields for utility companies, among the highest in the region. They also increase borrowing costs.

The German Prime Utilities Performance Index has a dividend yield of 3.28 percent, compared with 2.78 percent for the DAX.

Lufthansa, Europe's second-largest airline, decreased 52 cents, or 2.4 percent, to 20.87 euros. Ryanair Holdings Plc, the region's biggest biggest low-fare airline, forecast profit will grow at the slowest rate in four years in fiscal 2008 as the company slashes ticket prices to attract passengers.

The Dow Jones Stoxx 600 Travel & Leisure Index had its biggest drop in almost three months.

The following stocks also rose or fell today. Stock symbols are in parentheses.

Aareal Bank AG (ARL GY) increased 84 cents, or 2.2 percent, to 38.94 euros. Morgan Stanley rated shares of the commercial property lender ``overweight'' in resumed coverage, setting its price estimate at 46 euros.

``We remain high conviction in the name as the best restructuring story in German banks,'' analysts including Ronny Rehn in London wrote in a report published today.

Adidas AG (ADS GY) slipped 80 cents, or 1.7 percent, to 46.20 euros. Billionaire sports retailer Mike Ashley has made at least 43 million euros ($58 million) by selling his stake in the world's second-largest sporting goods maker, the Financial Times reported, without saying where it got the information.

Conergy AG (CGY GY) gained 4.06 euros, or 7.2 percent, to 60.60 euros. Citigroup Inc. raised its price estimate for the country's largest solar-power company 9.4 percent to 70 euros.

``We feel less nervous about Conergy's risk profile, reducing the discount we applied before'' after accompanying Chief Executive Officer Hans-Martin Rueter on a roadshow, Benjamin Kluftinger, an analyst at Citigroup in London, wrote in a report published today.

Citigroup has a ``buy'' recommendation on the stock.

Deutsche Telekom AG (DTE GY) declined 13 cents, or 0.9 percent, to 13.97 euros. Arcor AG, the German fixed-line phone unit of Vodafone Group Plc, cut prices of its combined phone and Internet packages by more than 12 percent to take on market leader Deutsche Telekom.

Separately, UniCredit Markets & Investment Banking cut its recommendation on the shares to ``hold'' from ``buy'' in a report published today.

Ersol Solar Energy AG (ES6 GY) rose 69 cents, or 1.2 percent, to 58.45 euros. The solar cell maker said it signed a letter of intent to source polysilicon from Russia's Nitol Group through 2012, an agreement that will help it reduce raw material costs and increase production capacity.

Jungheinrich AG (JUN3 GY) added 15 cents, or 0.5 percent, to 31.60 euros. Germany's second-largest maker of forklifts said revenue this year should rise 9 percent to more than 1.9 billion euros after an increase in orders.

Merck KgaA (MRK GY) advanced 5.47 euros, or 5.5 percent, to a record 104.28 euros. The German drugmaker that bought Serono SA said yesterday tests showed a chemotherapy it licensed from Taiho Pharmaceutical Co. works as a first-choice treatment when combined with folinic acid and the Erbitux antibody.

Merck may replace Altana AG (ALT GY) in Germany's benchmark DAX Index this month, analysts said.

``The decision on Merck's inclusion in the DAX is merely a formality,'' said Christian Stocker, an index strategist at UniCredit in Munich.

Deutsche Boerse AG, which operates the Frankfurt exchange, will announce the results of its quarterly index review after 10 p.m. in Frankfurt. The changes will take effect June 18. Altana shares climbed 8 cents, or 0.4 percent, to 18.85 euros.

Repower Systems AG (RPW GY) advanced 9.13 euros, or 6.7 percent, to 145.71 euros. The wind-turbine builder will probably join the TecDAX Index of 30 technology companies, according to Stocker. If this happened, Bechtle AG (BC8 GY), a computer and software retailer, would be the most likely candidate to exit the TecDAX, Stocker said.

Bechtle shares added 17 cents, or 0.7 percent, to 25.64 euros.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net

Last Updated: June 5, 2007 12:09 EDT