German stocks were little changed, with the benchmark DAX Index closing at the lowest level since February 2010, as gains in utilities offset declines in carmakers.
EON AG advanced 3.6 percent as BofA Merrill Lynch Global Research recommended Germany’s largest utility. Bayerische Motoren Werke AG and Daimler AG led European carmakers lower, each falling more than 2 percent.
The DAX slipped 6.22, or 0.1 percent, to 5,473.78 at the 5:30 p.m. close in Frankfurt. The gauge fell 8.6 percent last week as concern escalated that the global economy is slowing and as the leaders of the euro area failed to restore investor confidence. The broader HDAX Index also lost 0.1 percent today.
“Fundamentals are not that bad,” said Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf. “I would be on the cautious side, but it’s a pretty good level to make a small entry.”
The DAX is trading at about 8.3 times the estimated earnings of its companies, the cheapest since October 2008, according to Bloomberg data.
The Federal Reserve holds its annual symposium in Jackson Hole, Wyoming, this weekend. This time last year Chairman Ben S. Bernanke hinted that the U.S. central bank might embark on a second round of asset purchases, kicking off a 28 percent rally in the Standard & Poor’s 500 Index that ended in a three-year high on April 29.
Record-low yields on Treasuries show traders expect Bernanke to signal the bank will begin a third program of bond buying to boost the economy. Barclays Plc said 10-year yields indicate traders have priced in $500 billion to $600 billion of Treasury purchases by the Fed. Citigroup Inc. said current rates can only be justified by more bond buying or assuming the economy will shrink by 2 percent.
“The market is expecting another round of asset purchases and it will come,” said Jasper in a phone interview today.
German Chancellor Angela Merkel resisted calls for common euro-area borrowing. Speaking in an interview with ZDF television from the chancellery in Berlin yesterday, she said bringing in euro bonds at this time would further undermine economic stability.
EON climbed 3.6 percent to 14.52 euros as BofA Merrill Lynch upgraded its recommendation on the company’s shares to “buy” from “neutral.” Competitor RWE AG climbed 1.5 percent to 25.61 euros.
“We believe the upside risks of both earnings and multiple expansion are not appropriately reflected in EON’s share price,” London-based analysts Christopher Kuplent and Paul Rogers wrote in a report today.
BMW and Daimler, the world’s biggest makers of luxury cars, slumped 4.2 percent to 50.09 euros and 2.2 percent to 33.96 euros, respectively. Preferred shares of Volkswagen AG, Europe’s largest carmaker, slipped 2.6 percent to 101.80 euros.
QSC AG jumped 4.9 percent to 2.07 euros after Platow Brief newsletter reported that KKR & Co. has sounded out the German telecommunications provider. A merger of QSC with KKR’s Versatel would make sense, Platow reported, without citing anyone.
Deutsche Euroshop AG advanced for the first time in three days, rising 4.9 percent to 26.75 euros. UBS AG raised its recommendation on the shopping-center owner to “buy” from “neutral.”
Air Berlin Plc jumped 16 percent to 2.84 euros, the largest advance since 2008. Deutsche Lufthansa AG, Ryanair Holdings Plc, and EasyJet Plc are among carriers that may take over some routes from Air Berlin after the company said last week that it would cut itineraries and ground planes to stem mounting losses, Financial Times Deutschland reported, citing spokesmen and a spokeswoman for the airlines. Lufthansa and EasyJet said today that they don’t expect to pick up any of the routes soon.