German Stocks Drop on Higher Yields, Retail-Sales Decline

German stocks fell, paring a monthly gain for the benchmark DAX (DAX) Index, as investors weighed the effect of increasing bond yields and as a report showed retail sales (GRFRIAMM) in the country missed forecasts.

Bayer AG (BAYN), the Leverkusen, Germany-based maker of health-care products, and ThyssenKrupp AG (TKA), the nation’s biggest steelmaker, led the retreat with declines of at least 1.5 percent each.

The DAX dropped 1 percent to 8,316.86 at 10:50 a.m. in Frankfurt. The gauge is still heading for a 5.1 percent increase in May and has risen in all but one of the last 12 months as central banks around the world maintained their stimulus efforts. The broader HDAX Index also lost 1 percent today.

“While the mid-term outlook seems positive for equities, you will experience a spike in volatility in the short term,” Jacques-Pascal Porta, who helps oversee $780 million at Ofi Gestion Privee in Paris, said in a phone interview today. “It will become more difficult to forecast what the Fed is going to do as each month passes. But also stocks have had a phenomenal performance and higher prices infer more volatility.”

The German VDAX Volatility Index, which measures the cost of buying protection against swings on the DAX, on May 23 rose the most in seven weeks after Fed Chairman Ben S. Bernanke said the central bank may reduce purchases if the economy improves. The risk gauge in January fell to a record low of 12.29.

The yield in the benchmark 10-year German bund rose to 1.53 percent on May 29 from 1.17 on May 2, and rates in similar U.S. Treasuries climbed to 2.17 from 1.63 this month on concern the Federal Reserve may taper its bond-buying program.

German retail sales unexpectedly fell in April for a third successive month, a release showed today. Sales, adjusted for inflation and seasonal swings, dropped 0.4 percent from March, when they fell a revised 0.1 percent, the Federal Statistics Office in Wiesbaden said. Economists in a Bloomberg News survey had forecast an increase of 0.2 percent.

Bayer declined 1.5 percent to 82.39 euros. ThyssenKrupp fell 1.7 percent to 15.56 euros.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

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

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