Oct. 2 (Bloomberg) -- German stocks dropped for a fourth consecutive day, with the DAX Index extending its weekly drop, after U.S. reports showed the U.S. jobless rate rose to a 26- year high and factory unexpectedly fell.

Deutsche Bank AG and Commerzbank AG, Germany’s largest banks, led declines as the European Union said bank losses could reach 400 billion euros ($581 billion). Infineon Technologies AG and Siemens AG slid more than 2 percent.

The DAX sank 1.6 percent to 5,467.90, for the longest stretch of daily losses in a month. The benchmark measure dropped 2 percent this week after a six-month rally left it valued at about 45 times its companies’ reported earnings as of Sept. 25, near the highest level since December 2003, according to weekly data compiled by Bloomberg. The broader HDAX Index lost 1.7 percent today.

“In the last two to three days we have seen disappointing economic numbers coming from the U.S. and it’s a reason for investors to take profits,” said Markus Steinbeis, head of equity portfolio management at the German unit of Pioneer Investments, which oversees about $221 billion globally. “It may be the beginning of the awaited consolidation period and the market will gain momentum around November-December again.”

The U.S. unemployment rate rose to 9.8 percent in September from 9.7 percent in August, the Labor Department said today in Washington. Payrolls fell by 263,000, more than economists had forecast, following a revised 201,000 decline the prior month. Orders placed with U.S. factories fell 0.8 percent in August after a revised 1.4 percent increase in July that was larger than previously estimated, the Commerce Department said.

Banks Tumble

International Monetary Fund Managing Director Dominique Strauss-Kahn said in Istanbul today that Europe’s economy may struggle to recover from the global recession and create jobs, even after it weathered the slump better than the U.S.

Commerzbank, Germany’s second-biggest bank, sank 9 percent to 7.64 euros, leading declines among European lenders. Larger competitor Deutsche Bank fell 2.3 percent to 49.82 euros.

A stress test of the European Union’s biggest banks showed they could withstand an even deeper recession, though with losses, a report to EU finance chiefs showed.

Deutsche Postbank AG, which is part-owned by Deutsche Bank, lost 3.8 percent to 22.65 euros. Chief Executive Officer Stefan Juette said it is uncertain whether the company will reach breakeven in the third quarter.

Infineon Downgrade

Infineon, Europe’s second-largest maker of semiconductors, slumped 3.5 percent to 3.63 euros. Sal. Oppenheim Jr. & Cie. KGaA cut its recommendation to “reduce” from “neutral” on the stock.

Separately, Volterra Semiconductor Corp. said a U.S. District Court granted the company a preliminary injunction against Infineon, Infineon Technologies North America Corp. and Primarion Inc. in a patent infringement lawsuit.

Siemens, Europe’s largest engineering company, declined 2.2 percent to 60.20 euros. Deutsche Lufthansa AG, the region’s second-biggest airline, dropped 1.8 percent to 11.53 euros. Metro AG, Germany’s largest retailer, retreated 3 percent to 36.50 euros.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Arcandor AG (ARO GY) dropped 6.7 percent to 22.4 cents. Friedrich Carl Janssen, chairman of the supervisory board of the retailer, has resigned, the Financial Times Deutschland reported, citing a letter written by Janssen to the supervisory board.

Pfleiderer AG (PFD4 GY) lost 6.9 percent to 7.47 euros, the lowest close in almost three weeks. Berenberg Bank downgraded the maker of laminate flooring to “hold” from “buy.”

Q-Cells SE (QCE GY) and Solarworld AG (SWV GY) fell 3 percent to 12.15 euros and 3.9 percent to 15.17 euros, respectively. Renewable Energy Corp. ASA, a Norwegian maker of solar energy products, said contract adjustments for wafers will have an adverse effect on earnings next year.

Sky Deutschland AG (SKYD GY) dropped 5 percent to 3.26 euros, closing at the lowest level since August. UBS AG downgraded Germany’s biggest pay-television company to “neutral” from “buy.”

Stada Arzneimittel AG (SAZ GY) decreased 3.4 percent to 17.96 euros, a third decline this week. “We are still cautious on longer term pricing” for generic drugs and “sell Stada’s recent strength,” Credit Suisse wrote in a report on German health-care today. Stada is still up 6.3 percent this week.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

Last Updated: October 2, 2009 12:14 EDT