German Stocks Drop, Paring Biggest Annual Gain Since 2003

German stocks fell on the last trading day of the year as concern grew that U.S. lawmakers will be unable to agree a deal to avoid a wave of tax increases and budget cuts.

Commerzbank AG (CBK) and Munich Re dropped at least 1 percent. ProSiebenSat.1 Media AG (PSM) retreated after regulators fined the broadcaster. Porsche SE advanced 6.3 percent to the highest price in nearly two years after a U.S. appeals court dismissed a lawsuit against the automaker.

The DAX Index (DAX) lost 0.6 percent to 7,612.39 at the close of trading in Frankfurt, bringing this week’s drop to 0.3 percent. German markets shut early today and are closed on Dec. 31. The broader HDAX Index also slid 0.6 percent.

The benchmark DAX has climbed 29 percent this year, the biggest annual increase since 2003, as the European Central Bank and the Federal Reserve expanded asset purchases. That’s the second-best performance among the 24 developed markets tracked by Bloomberg.

“Everybody is focused on the fiscal cliff,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “Investors don’t want to take any risk before this final countdown.”

The volume of shares changing hands in DAX-listed companies today was 42 percent lower than the average over the past 30 days, according to data compiled by Bloomberg.

Budget Talks

Obama summoned congressional leaders to a White House meeting three days before a year-end deadline to avoid $600 billion in spending cuts and tax increases, amid increasing concern that the time is too short to reach a deal.

Obama, who had been negotiating one-on-one with House Speaker John Boehner, will meet today with Republicans Boehner and Senate Minority Leader Mitch McConnell, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats. The meeting will be held at 3 p.m. Washington time.

The president returned early from his holiday in Hawaii yesterday as lawmakers disputed which party would be responsible for missing the deadline for a debt deal, a failure that could hurt the U.S. credit rating and cause a recession.

Separately, the House will hold an unusual Sunday session on the evening of Dec. 30.

Continental AG (CON), Europe’s second-biggest auto-parts supplier, led gains on the DAX in 2012, surging 82 percent. Chemical maker Lanxess AG (LXS) advanced 66 percent. Deutsche Lufthansa AG (LHA), Europe’s second-largest airline, rallied 55 percent while Volkswagen AG (VOW), the region’s biggest carmaker, increased 49 percent.

Commerzbank Slips

Commerzbank and Munich Re led banks and insurers lower today, falling 1.5 percent to 1.43 euros and 1 percent to 136 euros, respectively.

Deutsche Bank AG lost 1 percent to 32.95 euros. Landesbank Baden-Wuerttemberg sued Germany’s largest bank in New York, accusing the lender of fraud in the sale of $173 million in mortgage-backed securities in 2007.

“We believe this suit is without merit and we intend to defend ourselves,” Amanda Williams, a spokeswoman for Frankfurt-based Deutsche Bank, said in an e-mail.

ProSiebenSat.1, the broadcaster controlled by KKR & Co. and Permira Advisers LLP, dropped 0.6 percent to 21.30 euros after Germany’s cartel agency fined the company and RTL Group SA for an agreement to encode the broadcast of some programs.

RWE AG, Germany’s second-largest utility, fell 1.1 percent to 31.24 euros.

Porsche preferred shares surged 6.3 percent to 61.70 euros, the highest price since January 2011. An appeals court in New York state dismissed a lawsuit by hedge funds that accused the German carmaker of concealing a plan to corner the market in Volkswagen shares. The plaintiffs had sought more than $1 billion in damages.

Henkel AG, a German chemical company, rose 1.3 percent to 62.20 euros, snapping three days of losses.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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