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German Stocks Fall for Second Day as Deutsche Bank Drops

German stocks fell for a second day as uncertainty over whether Spain will seek a bailout outweighed a report showing that investor confidence improved for the first time in five months in Europe’s largest economy.

Deutsche Bank AG (DBK) slid 4.9 percent, the most in six weeks, as Banco Espirito Santo SA reduced its recommendation on the shares. Volkswagen AG (VOW) lost 2.3 percent after a report showed European car sales dropped in August. Merck KGaA (MRK) slipped 1 percent after the company abandoned an attempt to get approval for a cancer treatment.

The DAX Index (DAX) dropped 0.8 percent to 7,347.69 at the close of trading in Frankfurt. The equity benchmark has still rallied 23 percent from this year’s low on June 5, closing at its highest level in 14 months last week as European Central Bank policy makers approved a bond-buying program and the Federal Reserve started a third round of asset purchases. The broader HDAX Index lost 0.7 percent today.

“Stimulus plans and policy measures have been digested, the backstops are understood, but the confidence in banks and the general economy is still being questioned,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich, who helps manage 70 million euros ($91.4 million).

The DAX’s rally this year has pushed the gauge’s valuation to 11.2 times the estimated earnings of its constituent companies, close to its highest multiple since May 2011, according to data compiled by Bloomberg.

ECB Governing Council member Luc Coene said Spain may have to ask the European Commission for aid and submit to conditions imposed by its creditors if bond yields continue to increase. Coene spoke at a panel discussion in London yesterday.

Spain’s Bonds

Spain’s bond yields climbed to more than 6 percent yesterday for the first time since Sept. 7, the day after policy makers approved ECB President Mario Draghi’s plan to buy government debt to ensure the transmission of interest rates.

The Spanish government sold 4.6 billion euros of bills at an auction today, more than its maximum target.

German investor confidence rose for the first time in five months in September. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to minus 18.2 from minus 25.5 in August. Economists had forecast a gain to minus 20, according to the median of 41 estimates in a Bloomberg News survey.

Banks Fall

Deutsche Bank, Germany’s biggest bank, declined 4.9 percent to 32.40 euros after Espirito Santo cut its recommendation on the shares to sell. Commerzbank AG (CBK), the country’s second-largest lender, lost 3.4 percent to 1.59 euros.

Volkswagen, Europe’s biggest carmaker, fell 2.3 percent to 148.10 euros. Bayerische Motoren Werke AG (BMW), the largest maker of luxury vehicles, slid 2 percent to 60.45 euros.

European car sales dropped in August as the region’s economic woes hurt demand in Germany, which had helped to offset declining sales in other countries. Registrations fell 8.5 percent to 722,483 vehicles from a year earlier, the Brussels- based European Automobile Manufacturers’ Association said.

Merck retreated 1 percent to 93.88 euros. The Darmstadt, Germany-based company said it will no longer seek permission to sell its Erbitux drug to lung cancer patients after a European regulator asked for more clinical data.

Merck said it withdrew its application to the European Medicines Agency. The drugmaker won’t refile with extra data, Gangolf Schrimpf, a spokesman said.

Infineon Technologies AG (IFX), Europe’s second-biggest semiconductor maker, sank 4.1 percent to 5.71 euros, its largest retreat in six weeks.

Suedzucker AG (SZU), which makes sugar, starch and bakery additives, gained 2.8 percent to 26.59 euros as a gauge of food and drink companies posted the second-largest advance of the 19 industries in the Stoxx Europe 600 Index. (SXXP)

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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