German stocks fell for a fifth day, with the benchmark DAX Index extending a four-month low, amid concern a slowdown in the U.S. economy is damping global growth.
Metro AG, Germany’s biggest retailer, plunged to the lowest price in two years after saying operating profit dropped as its Media-Saturn consumer-electronics unit posted the first loss in at least 20 years. Wacker Chemie AG sank 10 percent after reporting earnings that missed analysts’ estimates.
The DAX lost 2.3 percent to 6,796.75 at the 5:30 p.m. close in Frankfurt. The gauge retreated to its lowest level since March yesterday as a report showed U.S. manufacturing expanded in July at the slowest pace in two years. The DAX has sunk 9.7 percent from this year’s high on May 2 as investors speculated that Europe’s sovereign-debt crisis would derail the economic recovery. The broader HDAX Index slumped 2.5 percent today.
“After yesterday’s extremely weak manufacturing data, we can expect a debate in the coming days or weeks on whether a recession is imminent in the U.S.,” said Ansgar Krekeler, a sales analyst at WGZ Bank AG in Dusseldorf. “This is likely to question analysts’ earnings estimates and to put markets under pressure.”
Congressional leaders voiced confidence the Senate will vote today to ratify a U.S. debt-limit compromise that will avert a default even as it defers decisions on the nation’s finances to a bipartisan panel. The U.S. deficit deal will add to a reduction in growth next year of 1.5 percentage points coming from the expiration of past stimulus programs, according to economists at JPMorgan Chase & Co. and Deutsche Bank Securities.
Both Standard & Poor’s and Moody’s Investors Service are weighing whether to cut the U.S.’s credit rating. S&P said last month that the political impasse has boosted to 50 percent the chance that it will downgrade the country’s debt from AAA within three months.
German stocks extended declines after a report showed that consumer spending in the U.S. unexpectedly dropped in June for the first time in almost two years as a slump in hiring caused households to retrench. Purchases decreased 0.2 percent, after a 0.1 percent gain in May, Commerce Department figures showed. The median estimate of 77 economists surveyed by Bloomberg had called for a 0.1 percent increase.
European stocks became the first major region to enter a so-called correction yesterday, with the Stoxx Europe 600 Index dropping 10 percent from this year’s highest level as falling Spanish and Italian bonds showed the debt crisis is spreading.
About 63 percent of companies in the DAX that have reported earnings since July 11 missed analysts’ estimates for earnings per share, according to data compiled by Bloomberg.
Metro declined for a fifth day, plunging 7.5 percent to 34.97 euros, its lowest price since July 2009. The company said second-quarter net income dropped 9 percent to 40 million euros ($57 million), while analysts in a Bloomberg survey had estimated 87.8 million euros. Earnings before interest, taxes and one-off items fell 8 percent to 306 million euros.
Wacker Chemie plummeted 10 percent to 116.45 euros, its biggest drop since December 2008. Quarterly profit rose to 142.7 million in the second quarter, missing the 152 million-euro average estimate of seven analysts in a Bloomberg survey.
ThyssenKrupp AG and Salzgitter AG, Germany’s biggest steelmakers, lost 5.2 percent to 28.54 euros and 6.3 percent to 46.86 euros, respectively. Basic-resource companies were among the worst performers in the benchmark Stoxx Europe 600 Index, losing 2.6 percent.
Muehlbauer Holding AG & Co. slumped 9 percent to 27.21 euros, its lowest price in nine months. The maker of machines used to produce smart cards said first-half net earnings fell to 9.3 million euros from 12.6 million euros in the year-earlier period.