German Stocks Retreat as Merkel Rejects Euro Bonds; EON Falls
German stocks (DAX) fell after Chancellor Angela Merkel said joint euro-area bonds will send a “wrong signal,” offsetting a report that showed business confidence in Europe’s biggest economy unexpectedly rose in November.
The benchmark DAX Index dropped 0.5 percent to 5,428.11 at the close in Frankfurt, extending its longest falling streak since Aug. 10. The gauge has lost 10 percent since Nov. 11 as Italian, Spanish and French bond yields soared, adding to concern the debt crisis is spreading to the euro area’s larger economies. The broader HDAX Index (HDAX) slipped 0.3 percent today.
“The market sees a ‘no’ and reacts to it,” said Martin Huefner, chief economist at Assenagon GmbH in Munich, which manages more than $4.7 billion of client assets. “We’re going to see a deterioration of equity markets in the coming months to the point where something will have to be done. The market would be euphoric to get euro bonds. Apparently the pressure is not big enough yet.”
Merkel repeated her opposition to common debt sales and added that joint euro-area bonds would lead to a convergence of interest rates in the region.
The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 106.6 from 106.4 in October. Economists had predicted a decline to 105.2, according to the median of 40 forecasts in a Bloomberg News survey.
Fresenius SE (FRE) & Co. KGaA and Fresenius Medical Care AG followed losses in European health-care companies, dropping 2.6 percent to 67.36 euros and 1.9 percent to 48.50 euros respectively.
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