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German Stocks Drop on Euro-Area Industrial Production

German stocks dropped to its lowest level in more than two months as reports showed euro-region industrial production tumbled the most in more than three years and U.S. retail sales trailed forecasts.

EON AG retreated 3.1 percent as brokerages including Deutsche Bank AG and Bank of America Corp. lowered their recommendations on Germany’s largest utility. Infineon Technologies AG (IFX) surged 5.9 percent after Europe’s second-biggest semiconductor maker reported sales and operating profit that topped analysts’ estimates.

The DAX slid 0.9 percent to 7,101.92 at the close in Frankfurt, its lowest level since Sept. 5. The equity benchmark has dropped 3.7 percent since the re-election of President Barack Obama on Nov. 6 as investors’ attention turned to the so- called U.S. fiscal cliff that will trigger automatic budget cuts and tax increases unless Congress reaches a compromise. The broader HDAX Index also slipped 0.9 percent today.

“The risk of falling off the fiscal cliff continues to weigh on sentiment, as no one is buying into weakness,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen where he helps oversee $55 billion. “Meanwhile, Spain won’t request a bailout for another 11 days till after local elections in Catalonia.”

The DAX (DAX) climbed less than 0.1 percent yesterday, erasing declines in the final hour of trading amid speculation Spain will soon seek a full bailout from the European Union.

European Economy

Euro-region industrial production declined 2.5 percent in September, wider than the 2 percent slide that economists had forecast. Output in the 17-nation euro area increased a revised 0.9 percent in August, the European Union’s statistics office in Luxembourg said today. In the U.K., a release from the Office for National Statistics showed that the unemployment rate dropped to 7.8 percent in September from 7.9 percent in the three months through August.

In the U.S., a Commerce Department report showed retail sales fell 0.3 percent in October. The median forecast of 83 economists surveyed by Bloomberg called for a 0.2 percent drop.

EON slipped 3.1 percent to 14.19 euros as brokerages including Deutsche Bank, Bank of America, Commerzbank AG, Exane BNP Paribas and Societe Generale SA cut their ratings for the utility. The shares tumbled the most in more than 20 years yesterday after EON said its forecast of 3.2 billion euros ($4.1 billion) to 3.7 billion euros had become unachievable.

K+S Falls

K+S AG (SDF) dropped 2.5 percent to 33.43 euros as Exane and HSBC Holdings Plc reduced their share-price estimates to 31 euros and 50 euros, respectively. Europe’s largest potash maker said yesterday that sales and profit in 2012 will only reach the bottom of its targeted range as delayed Chinese and Indian contracts restrained market prices for fertilizer.

Infineon jumped 5.9 percent to 5.55 euros. Operating profit of 116 million euros in the three months ended Sept. 30 beat the 105 million-euro average of analyst estimates compiled by Bloomberg. Sales slipped 1 percent to 982 million euros from the previous three-month period, the Neubiberg, Germany-based company said. Analysts had predicted revenue of 974 million euros.

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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