German stocks slid the most in three weeks as billionaire investor George Soros warned that failure to produce drastic measures at a meeting of European Union leaders could spell the demise of the euro.
HeidelbergCement AG, the world’s third-largest maker of cement, retreated 4.2 percent. Deutsche Bank AG (DBK), the country’s biggest bank, lost 4.1 percent after RBC Capital Markets downgraded the stock. ThyssenKrupp AG (TKA) fell 3.8 percent as JPMorgan Chase & Co. reduced its share-price estimate for Germany’s largest steelmaker.
The DAX Index slid 2.1 percent to 6,132.39 at the close of trading in Frankfurt, the biggest drop since June 1. The gauge has fallen 14 percent from its 2012 high on March 16 amid concern that the euro-region debt crisis is harming the economy, trimming the advance in the first six months of the year to 4 percent. The broader HDAX Index retreated 2 percent today.
“There is no conviction to put money to work and take any risks as we wait for this week’s European meeting,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich. “When Soros talks, people listen, and when he talks about a ‘fiasco,’ there is a lack of conviction in buying shares.”
EU leaders will hold a two-day summit starting on June 28 amid concern that the region’s debt crisis is spreading, while Italy and Spain auction debt tomorrow.
Soros called on policy makers in Europe to create a European fiscal authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts. Funding for the purchases would come from the sale of European Treasuries, which would have low yields because they would be backed by each euro member, he said in an interview with Bloomberg Television’s Francine Lacqua yesterday.
“There is a disagreement on the fiscal side,” said Soros. “Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal.”
German Chancellor Angela Merkel hardened her resistance to euro-area debt sharing, saying at a conference in Berlin today that “euro bonds, euro bills and European deposit insurance with joint liability and much more” are “economically wrong and counterproductive.”
“It’s not a bold prediction to say that in Brussels most eyes -- all eyes -- will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”
German stocks fell even as demand for new U.S. homes rose more than forecast in May. Purchases climbed to a 369,000 annual rate, up 7.6 percent from the prior month and the most since April 2010, the Commerce Department reported today in Washington. The median estimate in a Bloomberg survey of 67 economists was 347,000.
HeidelbergCement dropped 4.2 percent to 34.98 euros, the largest decline in six weeks.
Deutsche Bank declined 4.1 percent to 27.37 euros after the stock was downgraded to sector perform, the equivalent of hold, from outperform by Fiona Swaffield, an analyst at RBC.
ThyssenKrupp fell 3.8 percent to 12.20 euros as JPMorgan cut the stock’s price estimate to 18 euros from 21 euros. The brokerage kept its overweight recommendation, equivalent to a buy rating.
EON AG and RWE AG (RWE), the country’s two largest utilities, fell 3.1 percent to 15.37 euros and 3.2 percent to 29.94 euros, respectively. The companies may outsource nuclear disposals to Areva SA, the world’s biggest maker of atomic reactors, according to Handelsblatt.
RWE’s Nordsee Ost wind farm will produce power later than previously planned due to delays in its grid connection, Der Spiegel quoted the German utility’s incoming chief executive officer, Peter Terium, as saying.
Suedzucker AG (SZU) advanced 1.7 percent to 26.25 euros, a third day of gains, after the sugar refiner said first-quarter operating profit climbed to 263 million euros ($328 million) from 184 million euros.
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