Germany’s DAX closed little changed, posting its biggest weekly drop since March, as U.S. consumer confidence retreated more and investors speculated that stress tests on Europe’s banks may show they have insufficient capital.
Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest banks, declined. Hugo Boss AG (BOS) rose to its highest price since at least 1998 as the clothing company raised its full-year earnings forecast after second-quarter profit jumped more than fivefold to 31 million euros ($43.7 million).
The benchmark DAX Index (DAX) rose 0.1 percent to 7,220.12 at the 5:30 p.m. close in Frankfurt. The gauge has fallen 2.5 percent this week as concern mounted that Europe’s sovereign-debt crisis will spread to the bigger economies of Italy and Spain. The DAX has declined 4.1 percent since this year’s high on May 2. The broader HDAX Index was little changed, rising less than 0.1 percent.
The European Banking Authority will release the results of stress tests for 91 banks from 5 p.m. London time today as part of an effort to reassure investors that the region’s banks have sufficient capital.
To pass, lenders will need to maintain a core Tier 1 capital ratio of more than 5 percent in a stressed scenario. The tests include a 0.5 percent economic contraction in the euro area in 2011, a 15 percent drop in European equity markets and trading losses on sovereign debt not held to maturity.
“Cautiousness dominates the trading session today as stress-test data to be released today after the bell holds the focus,” said Anita Paluch, a sales trader at ETX Capital in London. “Although the test is considered to be tougher than the last one and it examines the 90 banks’ ability to survive diverse shocks, it does not account for the possibility of a Greek default which is of immensely growing concern to the markets.”
U.S. Consumer Confidence
A report today showed that confidence among U.S. consumers unexpectedly fell in July to the lowest level since March 2009. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.8 from 71.5 in June. The gauge was projected to rise to 72.2, according to the median forecast of 62 economists surveyed by Bloomberg News.
Deutsche Bank and Commerzbank lost 1.5 percent to 37.15 euros and 3 percent to 2.50 euros, respectively. The bank assessments today are the first by the EBA since it was set up earlier this year. Last year’s tests by the authority’s predecessor were criticized for not being tough enough. Lenders were shown to need only 3.5 billion euros more capital, a 10th of the lowest analyst estimate.
Infineon, Hugo Boss
Infineon Technologies AG (IFX) slid 2.4 percent to 7.27 euros as a gauge of technology companies was among the worst performers of the 19 industry groups in the benchmark Stoxx Europe 600 Index.
Hugo Boss jumped 6.7 percent to 77 euros. The company forecast an increase in 2011 sales of 15 to 17 percent after adjustments for currency effects, compared with a previous prediction of at least 12 percent. The luxury clothing maker said earnings before interest, taxes, depreciation and amortization, or Ebitda, before special items, will rise 25 to 30 percent, compared with an earlier forecast of at least 15 percent.
Volkswagen AG (VOW) climbed 2.9 percent to 151 euros, its highest price on record. Europe’s biggest carmaker said sales of cars, sport-utility vehicles and vans at the company’s brands including its Audi AG luxury division and Czech unit Skoda rose 14 percent. Global industry sales increased 6.1 percent in the same period, according to the company.
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