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Stocks Retreat in Germany, Trimming Weekly Advance; Deutsche Bank Falls

German stocks retreated, sending the the benchmark DAX Index to a weekly decline, as employers in the U.S. hired fewer workers in May than forecast and a Hungarian official said the nation’s economy is in a “very grave situation.”

Deutsche Bank AG and Commerzbank AG followed European banking shares lower, falling more than 2 percent, while carmakers also dropped. ThyssenKrupp AG and Salzgitter AG fell with metal prices. The euro dropped below $1.20 for the first time since March 2006 amid speculation the region’s fiscal crisis is spreading.

The DAX dropped 1.9 percent to 5,938.88 in Frankfurt, ending the week down 0.1 percent. The gauge is 6.2 percent below its April 26 high on concern the sovereign-debt crisis in Europe will hold back economic growth. The broader HDAX Index tumbled 1.9 percent today, ending the longest winning streak since July 2009.

“We’re still in an environment where the debt crisis will not be solved immediately,” said Michael Koehler, head of strategy at Landesbank Baden-Wuerttemberg in Mainz. “Expectations on U.S. payrolls were quite high. Private payrolls were quite weak and it’s not surprising the market is reacting so strongly.”

Payrolls rose by 431,000 last month, including a 411,000 jump in government hiring of temporary workers for the 2010 census, Labor Department figures in Washington showed today. Economists projected a 536,000 gain, according to the median forecast in a Bloomberg News survey. Private payrolls rose a less-than-forecast 41,000. The jobless rate fell to 9.7 percent.

Hungarian Debt

The cost of insuring against losses on Hungarian sovereign debt jumped 83.5 basis points to 391.5, according to CMA DataVision prices. Swaps on France, Austria, Belgium and Germany also rose, sending the Markit iTraxx SovX Western Europe Index of contracts on 15 governments 10 basis points higher to 163, and close to the all-time high of 167 on May 6.

“It’s clear that the economy is in a very grave situation,” Peter Szijjarto, spokesman for Hungarian Prime Minister Viktor Orban, said today in Budapest. “I don’t think it’s an exaggeration at all to talk about a default.”

Former Finance Minister Peter Oszko said Hungary is “in no way near default.” Public debt equaled 78 percent of gross domestic product last year, compared with an average of 74 percent for the European Union.

Deutsche Bank, Germany’s biggest bank, dropped 2.9 percent to 47.03 euros, while Commerzbank, the second-biggest, plunged 2.5 percent to 5.55 euros. European banking shares lost 3.8 percent today, the worst performance among 19 industry groups in the Stoxx Europe 600 Index.

Volkswagen AG, Europe’s largest carmaker, declined 3.1 percent to 70.03 euros, while Bayerische Motoren Werke AG retreated for the first time this week, losing 2.8 percent to 38.11 euros.

ThyssenKrupp and Salzgitter, Germany’s biggest steelmakers, lost 2.1 percent to 21.40 euros and 2.7 percent to 49.86 euros, respectively. Aluminum, copper, lead, nickel, tin and zinc all fell on the London Metal Exchange.

Air Berlin Plc lost 1.3 percent to 3.55 euros as Germany’s second-largest airline was downgraded to “sell” from “hold” at Royal Bank of Scotland Group Plc.

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

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