German Stocks Decline as Focus Shifts to U.S. Deficit

German stocks retreated from a five- year high as investors shifted focus from the U.S. budget deal averting most scheduled tax increases to upcoming negotiations on lowering the nation’s deficit.

K+S AG (SDF), Europe’s largest potash maker, lost 3.1 percent after Citigroup AG lowered its recommendation on the stock. Fresenius Medical Care AG fell 0.9 percent. Infineon Technologies AG (IFX) rose 1.2 percent.

The DAX Index (DAX) declined 0.2 percent to 7,765.47 at 10:35 a.m. in Frankfurt. The measure rallied 29 percent in 2012, its best annual performance since 2003, as the European Central Bank and the Federal Reserve expanded asset purchases. The broader HDAX Index (HDAX) dropped 0.1 percent today.

“When you look at the actual details of the deal struck, it just doesn’t look as if we’re doing anything more than a short-term kicking of the can down the road,” Stewart Richardson, chief investment officer at RMG Wealth Management LLP said on “On the Move” with Francine Lacqua on Bloomberg Television.

German stocks rose the most in six weeks yesterday after the U.S. Congress agreed a budget bill that avoids most scheduled tax increases threatening a recovery in the world’s largest economy. Still, the package won’t reduce deficits enough to avoid a sovereign-rating downgrade, Moody’s Investors Service said yesterday.

Republicans are planning to use the need to raise the nation’s $16.4 trillion debt ceiling to try to force President Barack Obama to accept spending cuts. Congress must act as early as mid-February to prevent a default.

Fraught Months

“The next several months are going to be potentially fraught in terms of the spending cuts negotiations, the debt ceiling, and it’s just the cold reality of the day that there is a lot of work to be done,” said Richardson.

Unemployment in Europe’s largest economy increased less than economists forecast in December. The number of people out of work rose a seasonally adjusted 3,000 to 2.942 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 10,000, the median of 19 estimates in a Bloomberg News survey showed. The adjusted jobless rate held steady at 6.9 percent, close to a two-decade low.

K+S dropped 3.1 percent to 34.05 euros. Citigroup cut its recommendation on the shares to neutral from buy after potash producers agreed to sell to China’s Sinofert Holdings Ltd. at a price that’s $70 a ton below a March agreement.

Fresenius Medical Care, the world’s biggest supplier of kidney dialysis, lost 0.9 percent to 51.69 euros.

Infineon, Europe’s second-biggest semiconductor maker, climbed 1.2 percent to 6.47 euros.

To contact the reporter on this story: Alexis Xydias in London at

To contact the editor responsible for this story: Alan Soughley at

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