German Stocks Fall as Euro-Area Economy Shrinks

German stocks fell for the first time in three days as a report showed the economy of the 17 nations using the euro contracted more than forecast.

Infineon Technologies AG and Pfeiffer Vacuum Technology AG dropped more than 2 percent as HSBC Holdings Plc recommended that investors sell the shares. Deutsche Bank AG and Commerzbank AG, Germany’s two biggest lenders, lost more than 1 percent.

The benchmark DAX Index slid 1.1 percent to 7,631.19 at the close, paring the gauge’s advance this year to 0.3 percent, the worst performance among 24 developed markets tracked by Bloomberg. The broader HDAX Index slipped 1 percent today.

“We have the headwind of fiscal austerity across Europe this year,” said Michael Morris, who oversees $1 billion as head of European equities at Mitsubishi UFJ Asset Management in London, and is now investing in European companies with sales in the U.S. “This is a time for risk-off sentiment after the strong run the market has had. The market is vulnerable at these levels, but there are still a lot of investors on the sidelines who see this as an opportunity.”

The number of shares changing hands in companies listed on the DAX was 13 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.

The euro area’s recession deepened in the fourth quarter, with the combined economy of the 17 nations that use the currency contracting the most since the first quarter of 2009. Gross domestic product fell 0.6 percent from the third quarter, the European Union’s statistics office in Luxembourg said. That was wider than the 0.4 percent contraction called for in a survey of 45 economists.

Germany’s Economy

The German economy, Europe’s largest, shrank more than economists had forecast as exports declined. Gross domestic product fell 0.6 percent from the third quarter, the Federal Statistics Office in Wiesbaden said. The median projection in a Bloomberg News survey had called for it to shrink 0.5 percent.

Infineon Technologies retreated 2.2 percent to 6.29 euros. HSBC downgraded its rating on Europe’s second-largest semiconductor manufacturer to underweight, the equivalent of a sell recommendation, from neutral. The brokerage said Infineon’s margins most improve over the next few quarters to justify its current valuation.

Pfeiffer Vacuum, which produces vacuum pumps, slid 3.3 percent to 90.77 euros. HSBC also cut its recommendation on the stock to underweight from neutral.

Deutsche Bank and Commerzbank dropped 1.2 percent to 36.32 euros and 1.5 percent to 1.47 euros, respectively.

ThyssenKrupp Slips

ThyssenKrupp AG, Germany’s largest steelmaker, fell 1.6 percent to 17.62 euros. Finnish peer Outokumpu Oyj predicted that operating profit will decline in the first quarter.

Suess Microtec AG retreated 3.8 percent to 8.81 euros, dropping the most in almost 16 months. The Garching, Germany- based technology company predicted that earnings before interest and taxes will drop to the low single-digit million euros in 2013 from 11.7 million euros ($15.6 million) last year. The company will report its final full-year earnings on March 28.

Rheinmetall AG surged 7.3 percent to 43.31 euros, its biggest gain in 15 months. The arms company posted Ebit of 301 million euros for 2012, more than the median analyst estimate of 291 million euros.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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