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German Stocks Decline as Merkel, Sarkozy Discuss Fiscal Union

German stocks (SXXP) declined, following a three-week advance, as Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin to discuss the euro area’s new fiscal agreement.

Deutsche Bank AG (DBK) and Commerzbank AG (CBK), the country’s biggest lenders, paced losses among European banks. HeidelbergCement AG dropped after Citigroup Inc. lowered its view of the shares. Bayerische Motoren Werke AG (BMW) rose 2.3 percent after record sales in 2011 across three brands.

The benchmark DAX Index fell 0.7 percent to 6,017.23 at the close in Frankfurt. The gauge last week advanced 2.7 percent as the U.S. employment rate unexpectedly fell, adding to data showing the recovery is gathering pace in the world’s biggest economy. The wider HDAX Index slid 0.6 percent today.

“The stock market does not know what leg to lean on as the European debt crisis draws headlines, while U.S. and Asian indicators are quite decent,” chief equity adviser Lars Mogeltoft at Nordea Private Banking in Copenhagen said in a note to clients.

The DAX (DAX) has increased (DAX) 19 percent from the last year’s lowest level on Sept. 12 as optimism grew that euro-area policy makers will contain the debt crisis. The gauge is still 20 percent below its 2011 high as borrowing costs from Spain to Italy jumped, raising concern more countries will need bailouts.

Merkel and Sarkozy met today for the first time in 2012 to flesh out a new rulebook for budget discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the 17-member euro area. The two leaders said they may complete their new budget rules by Jan. 30, one month ahead of schedule.

Industrial Output

European Union President Herman Van Rompuy said a political agreement on the fiscal treaty should be reached by the end of January and the “compact” signed by the beginning of March.

German industrial production (GRIPIMOM) dropped 0.6 percent in November, according to the median estimate of economists surveyed by Bloomberg News before the figures are released today. Production had increased 0.8 percent in October.

Exports from Germany rebounded in November. Adjusted for work days and seasonal changes, exports rose 2.5 percent from October, when they had slumped 2.9 percent, the Federal Statistics Office in Wiesbaden said today. The increase was larger than the median forecast of a 0.5 percent gain in a Bloomberg News survey of 13 economists.

Negative Yields

Germany’s Federal Finance Agency said it sold sixth-month bills with a yield of minus 0.01 percent, the first time a national money market instrument offered a negative yield. The sale drew bids that were nearly double the offer of 3.9 billion euros.

Banks performed the worst (SXXP) of the 19 industry groups on the benchmark Stoxx Europe 600 Index. UniCredit SpA, which last week spurred a selloff in banking shares last week after announcing a share sale at a 43 percent discount, declined 13 percent as rights for the offering began trading in Milan. Italy’s biggest lender has lost 47 percent since it announced the offer.

Deutsche Bank and Commerzbank dropped 2.4 percent to 26.37 euros and 3.8 percent to 1.18 euros, respectively, as Cheuvreux cut European banks as a group to “underweight” from “neutral.”

HeidelbergCement AG (HEI) declined 3 percent to 32.76 euros after Citigroup downgraded the stock to “neutral.”

BMW Record Sales

Bayerische Motoren Werke AG rose 2.3 percent to 56.84 euros as the world’s biggest maker of luxury cars (BMW) said it generated record sales in 2011 in its BMW, Mini and Rolls Royce car brands. The Wall Street Journal Europe reported BMW is targeting faster growth than the overall market in 2012, citing an interview with Chief Executive Officer Norbert Reithofer. Daimler AG (DAI), the maker of Mercedes-Benz luxury cars, rose 0.7 percent to 36.73 euros.

Deutsche Euroshop AG (DEQ) rose 1.1 percent to 23.99 euros as the owner of shopping centers was upgraded to “buy” from “neutral” at Bank of America Corp.

Adidas AG, the world’s second-biggest maker of sporting gods and apparel, rose 2.2 percent to 52.90 euros as the company expects to increase sales of soccer products this year to more than the record 1.5 billion euros ($1.9 billion) posted in 2010 as the European Cup boosts demand, Chief Financial Officer Robin Stalker told Boersen-Zeitung in an interview.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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