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German Stocks Fall; Snapping Two-Day Rally; Banks Decline

German stocks fell, snapping a two-day rally, as concern mounted that Greece will leave the euro area and Japan’s exports grew at a slower pace than estimated.

Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, both slid 2.8 percent. Deutsche Boerse AG (DB1) fell 4 percent. ThyssenKrupp AG (TKA) slumped after Fitch Ratings downgraded its outlook on the shares to negative from stable.

The DAX Index (DAX) retreated 2.3 percent to 6,285.75 at the 5:30 p.m. close in Frankfurt, paring its 2.6 percent over the previous two days. The broader HDAX Index also decreased 2.3 percent today.

“Banks do not have a positive sentiment because of euro-zone fears,” said Christian Schmidt, a market analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt. “Banks are under pressure because it is unclear what the future will bring in terms of Greece, Spain and Italy.”

Greece’s former prime minister, Lucas Papademos, said that while it’s unlikely the nation will leave the euro, it remains a risk, according to a report in the Wall Street Journal yesterday. The leaders of the European Union meet in Brussels today to discuss the region’s debt crisis that has wiped almost $4 trillion from equity markets worldwide this month.

Japan’s exports in April trailed economists’ estimates. Exports grew 7.9 percent last month from a year earlier. That fell short of the median estimate for an 11.8 percent gain in a Bloomberg News survey.

Bank Losses

Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, face a wave of losses if Greece abandons the euro.

While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. After more than two years of preparation, banks remain at risk of deposit flight and rising defaults in other indebted euro nations.

Deutsche Bank fell 2.8 percent to 28.84 euros. Commerzbank also lost 2.8 percent to 1.41 euros.

Deutsche Boerse dropped 4 percent to 39.32 euros. The operator of the Frankfurt stock exchange may fall out of the Euro Stoxx 50 Index (SX5E) next week, said Petra Grafin von Kerssenbrock, a technical analyst at Commerzbank in Frankfurt. London Stock Exchange Group Plc plunged the most in 2 1/2 years after UniCredit SpA and Intesa Sanpaolo SpA sold an 11.5 percent stake in Europe’s oldest independent exchange.

ThyssenKrupp fell 5 percent to 14.64 euros. Fitch reduced its outlook for Germany’s largest steelmaker to negative from stable, while affirming its long-term rating at BBB-.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

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