German Stocks Drop From Five-Year High; Volkswagen Falls

German stocks declined from a five- year high as European leaders met in Brussels for a second day amid concern that stringent austerity conditions on debt-ridden nations are crimping their economic recovery.

Volkswagen AG (VOW) dropped 2.6 percent, leading losses on the benchmark index. Munich Re, the world’s biggest reinsurer, jumped to a 10-year high after Bank of America Corp. upgraded its rating for the shares, while JPMorgan Chase & Co. and Nomura Holdings Inc. raised their price estimates. K+S AG (SDF) rose for a sixth day as Commerzbank AG recommended buying the stock.

The DAX Index (DAX) fell 0.2 percent to 8,042.85 at the close of trading in Frankfurt. The benchmark measure has still rallied 5.7 percent this year amid optimism central banks around the world will continue to support economic growth. The broader HDAX Index slipped 0.2 percent today.

“A broad profit-taking retreat in stocks can happen swiftly at these strong levels,” Daniel Weston, a portfolio manager at Aimed Capital Management LCC in Munich, wrote in a message. “The market has had immense momentum which investors are in love with, but the economic environment isn’t so rosy in our eyes.”

The volume of shares changing hands in companies on the DAX was 83 percent greater than the average of the last 30 days, data compiled by Bloomberg showed.

Leaders Meeting

European Union leaders, meeting for a second day in Brussels today, may endorse plans for loosening austerity measures and giving debt-ridden countries more time to bring down deficits.

“If there is too much austerity, there will be too much unemployment,” French President Francois Hollande said late yesterday. “Flexibility is necessary if we want to make growth the priority.”

In the U.S., Industrial production increased 0.7 percent in February after being unchanged the previous month, figures from the Federal Reserve showed in Washington. The median estimate of economists surveyed by Bloomberg called for a 0.4 percent gain.

Confidence among American consumers unexpectedly slumped in March, another report showed.

Volkswagen, Europe’s biggest automaker, dropped 2.6 percent to 160.30 euros. Deutsche Bank AG is managing a sale about 5.8 million Volkswagen preferred shares for as much as 929 million euros.

Bayerische Motoren Werke AG (BMW), the largest maker of luxury cars, fell for a fifth day. The stock retreated 1.3 percent to 70 euros.

Munich Re

Munich Re advanced 2.1 percent to 150.25 euros, its highest price since 2002. Bank of America upgraded the shares to neutral from underperform. JPMorgan Chase and Nomura raised their target prices on the shares to 167 euros and 140 euros, respectively.

K+S, Europe’s biggest potash distributor, gained 2.2 percent to 37.53 euros as Commerzbank upgraded the shares to buy from hold.

HeidelbergCement AG (HEI), the world’s third-largest cement maker, increased 1.2 percent to 56.90 euros after Citigroup Inc. raised its target price on the shares to 61 euros from 57 euros. UBS AG raised its forecast price on the shares to 55 euros from 48 euros.

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