German stocks dropped, erasing yesterday’s rebound, led by a selloff in Fresenius Medical Care AG, as investors awaited a report that may show U.S. factory orders increased in May.
Fresenius Medical, the world’s biggest provider of kidney dialysis, tumbled 9 percent after the U.S. government proposed cutting payments for center operators next year, while major shareholder Fresenius SE slid 4.4 percent. RWE AG (RWE) extended a 21-month low after Morgan Stanley downgraded Germany’s second-largest utility.
The DAX (DAX) fell 0.9 percent to 7,914.82 at 10:26 a.m. in Frankfurt. The index rose 0.3 percent yesterday as equities around the world rallied after manufacturing data from Japan to the U.S. bolstered confidence in the global economy. The gauge has lost 7.3 percent since the Federal Reserve signaled on May 22 that it may start to pare stimulus if the U.S. economy strengthens. The broader HDAX Index also slid 0.9 percent today.
“This will be a short term correction,” Ramin Nakisa, global asset allocation strategist at UBS AG, told Francine Lacqua on Bloomberg Television in London. “We view this period as buying opportunity, a chance to load up on risk.”
A U.S. Commerce Department report at 10 a.m. in Washington today may show orders placed with factories rose 2 percent in May, according to the median economist forecast in a Bloomberg survey. They rose 1 percent the previous month.
Fresenius Medical dropped 9 percent to 49.54 euros after the U.S. government proposed cutting payments to kidney-dialysis center operators by 9.4 percent next year.
“This is a very dramatic cut,” Robert Sepucha, Fresenius’ senior vice president for government affairs in the U.S., said by telephone. “We’re concerned it would push dialysis clinics under the cost of care, which is not the right thing for Medicare to be doing.”
Fresenius SE, which owns a 31 percent stake in the kidney dialysis operator, lost 4.4 percent to 91.25 euros. Chief Executive Officer Ulf Mark Schneider told Euro am Sonntag in May that Fresenius Medical will account for 20 percent to 30 percent of the company’s profit in the future.
RWE dropped 2.9 percent to 22.57 euros after Morgan Stanley lowered its recommendation for the utility to equal weight from overweight. The bank also removed the company from its “best ideas” list and cut its 2014 to 2015 earnings estimate by 12 to 13 percent.
RWE slipped to a 21-month low yesterday after saying its outlook for 2013 was unchanged even as a court ruled in its favor in a dispute over gas payments to Gazprom.
EON AG, Germany’s largest utility, fell 3.3 percent to 12.02 euros. A gauge of utility stocks declined the most of the 19 industry groups on the Stoxx Europe 600 Index.
Talanx AG slid 4.3 percent to 23.44 euros after major shareholder HDI Haftpflichtverband der Deutschen Industrie VaG announced plans to sell a 3.2 percent stake in the insurer. The shares are being offered at 23.20 euros to 23.80 euros apiece via an accelerated bookbuild, according to the terms obtained by Bloomberg news.
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