Oct. 30 (Bloomberg) -- German stocks declined, with the DAX Index posting its first monthly decline since June, as retail sales unexpectedly fell for a second month.

Siemens AG, Europe’s largest engineering company, retreated 4.7 percent, leading a decline in industrial stocks. Munich Re, the world’s biggest reinsurer, and Allianz SE followed European insurance shares lower. ThyssenKrupp AG and Salzgitter AG fell with metal prices.

The benchmark DAX Index lost 3.1 percent to 5,414.96 in Frankfurt, the biggest decline since July. The gauge has fallen 4.6 percent in October and is down 5.7 percent this week amid concern a seven-month rally has outpaced the prospects for earnings and economic growth. The broader HDAX Index lost 3 percent to 2,719.02 today.

“The market will fall for the rest of the year,” said Matthias Jasper, head of equities at WGZ Bank in Dusseldorf. “Valuations are high. There’s not a lot of conviction around. We’re still in the middle of a pretty tough credit crisis.”

Retail sales in September, adjusted for inflation and seasonal swings, dropped 0.5 percent from August, the Federal Statistics Office in Wiesbaden said. Economists expected a gain of 1 percent, the median of 23 estimates in a Bloomberg News survey. From a year earlier, sales declined 3.9 percent.

European Union leaders said it’s too soon to withdraw emergency measures enacted to counter the recession, according to a draft of the conclusions at today’s 27-nation summit in Brussels.

‘Incipient Recovery’

“The incipient recovery needs close monitoring and the supporting policies should not be withdrawn until the recovery is fully secured,” according to a draft of the conclusions at today’s 27-nation summit in Brussels.

Americans cut spending for the first time in five months and a gauge of confidence weakened, signaling consumers will make a limited contribution to the recovery without government incentives.

Siemens lost 4.7 percent to 61.47 euros, its third decline this week. Deutsche Bahn AG may withdraw a tender for the delivery of 300 high-speed trains from Siemens and Alstom SA because the price is too high, Handelsblatt said, citing Ulrich Homburg, head of Deutsche Bahn’s passenger-transport division.

Munich Re, the world’s biggest reinsurer, dropped 3 percent to 107.64 euros. Allianz, Germany’s biggest insurer, fell 4.4 percent to 78.04 euros.

ThyssenKrupp

MetLife Inc., the biggest U.S. life insurer reported a third straight quarterly loss, while Aon Corp., the largest insurance broker, posted a 25 percent profit drop in the third quarter.

ThyssenKrupp AG and Salzgitter AG, Germany’s largest steelmakers, declined 3.2 percent to 21.90 euros and 2.8 percent to 61.24 euros, respectively. European basic-resource shares were the worst performers in Europe’s Stoxx 600 as metals fell on the London Metal Exchange.

Infineon Technologies AG lost 5.3 percent to 3.065 euros, while Daimler AG, the world’s second-biggest maker of luxury cars, slid 4.4 percent to 33.08 euros.

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

Aixtron AG (AIXA GY) jumped 6.1 percent to 20.37 euros as the maker of specialized equipment used to produce LED screens was raised to “outperform” from “neutral” at Exane BNP Paribas.

Pfeiffer Vacuum Technology AG (PFV GY) slid 2.5 percent to 51.12 euros, paring yesterday’s 4.9 percent gain. The maker of vacuum pumps used in the production of DVDs and instant coffee was cut to “hold” from “buy” at Norddeutsche Landesbank Girozentrale.

Solarworld AG (SWV GY) dropped 2.5 percent to 14.72 euros. Berenberg Bank cut its price estimate for the solar company to 15.5 euros from 20 euros.

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

Last Updated: October 30, 2009 13:12 EDT