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German Stocks Decline on Worsening Outlook for Carmakers

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June 14 (Bloomberg) -- German stocks dropped for a second day after Morgan Stanley and Citigroup Inc. cut their earnings estimates for European luxury carmakers and Spanish borrowing costs surged to a euro-era record.

Daimler AG, the third-biggest maker of luxury vehicles, and Bayerische Motoren Werke AG, the largest, fell at least 2 percent. Centrotherm Photovoltaics AG slumped to a record low.

The DAX Index retreated 0.2 percent to 6,138.61 at the close of trading in Frankfurt. The gauge has fallen 14 percent from its high on March 16 amid growing concern that Greece may be forced to leave the euro currency union. The broader HDAX Index slid 0.3 percent today.

“The automotive sector is quite weak,” said Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH, which oversees about $22 billion. “This reflects the fact that the overall news outlook is deteriorating, with car sales weaker than expected.”

Daimler lost 2 percent to 33.60 euros. BMW retreated 2.6 percent to 56.29 euros.

Morgan Stanley reduced its earnings-per-share estimates at both Daimler and BMW by 5 percent to 10 percent for this year, 2013 and 2014. The bank said it lowered the outlook on the premise that prices would fall 1.5 percent each year.

Citigroup cut its EPS projections for Daimler by 6 percent, 6 percent and 9 percent for 2012-14. Daimler’s sales figures show that global macro conditions continue to deteriorate, the brokerage said in a note.

Spanish Bond Yields

Spain’s bonds slumped, with 10-year yields briefly climbing to a euro-era record, after Moody’s Investors Service cut the nation’s credit rating to one step above junk, citing its rising debt burden and weakening economy.

Spain is experiencing a backlash following last week’s bailout as borrowing costs increase along with the country’s debt load, according to the French School of Political Science’s Howard Davies.

In the US, claims for jobless benefits unexpectedly climbed by 6,000 to 386,000 in the week ended June 9 from a revised 380,000 the prior week that was more than first estimated, Labor Department figures showed. Economists projected claims would fall to 375,000, according to the median estimate in a Bloomberg News survey.

Centrotherm Photovoltaics AG plunged 26 percent to 3.75 euros, its biggest drop and lowest price since it issued shares to the public in October 2007, after insurers cut off cover for deliveries to the maker of solar-power equipment.

Infineon Technologies AG, Europe’s second-largest semiconductor maker, fell 3.3 percent to 5.96 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

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