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German Stocks Decline as Investors Consider Fed Policy

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May 24 (Bloomberg) -- German stocks retreated for a second day as investors considered this week’s monetary policy announcements from the U.S. Federal Reserve, and carmakers slid.

Volkswagen AG and Bayerische Motoren Werke AG fell 0.8 percent each as a gauge of automakers lost the third-most of the 19 industry groups in the Stoxx Europe 600 Index. Dialog Semiconductor Plc, which makes chips used in Apple Inc.’s iPhone, slipped 5.3 percent.

The DAX Index lost 0.6 percent to 8,305.32 at the close of trading in Frankfurt, for a weekly drop of 1.1 percent. The gauge slid 2.1 percent yesterday, its biggest decline since April 17, amid concern the U.S. Federal Reserve will reduce its stimulus measures if the economy improves and as Chinese manufacturing unexpectedly fell. The HDAX Index retreated 0.5 percent today.

“Yesterday was a typical day -- when there is a hint that central banks are going to reduce levels of liquidity, markets take a dive,” Ion-Marc Valahu, co-founder and fund manager at Clairinvest in Geneva, said in a telephone interview. “Today we have a follow through from that because investors are questioning the ability and effectiveness of central banks to pump money into the markets.”

German business confidence increased in May for the first time in three months. The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 105.7 from 104.4 in April. That’s the first gain since February. Economists predicted sentiment to remain unchanged, according to the median of 44 forecasts in a Bloomberg News survey.

Consumer Confidence

Consumer confidence in Europe’s largest economy will jump to the highest in more than 5 1/2 years in June as low unemployment and receding inflation encourage households to spend, GfK AG said.

The market research company forecast today that its consumer-sentiment index, based on a survey of about 2,000 people, will increase to 6.5 next month from 6.2 in May. That would be the highest since September 2007. Economists expected the index to remain unchanged, according to the median of 26 estimates in a Bloomberg News survey.

The German economy grew just 0.1 percent in the first quarter after a 0.7 percent contraction in the final three months of 2012 as an unusually long winter damped construction and investment, according to a report today from the Federal Statistics Office in Wiesbaden.

In the U.S., orders for U.S. durable goods increased more than forecast in April. Bookings for equipment meant to last at least three years increased 3.3 percent last month after dropping 5.9 percent in March, the Commerce Department said today in Washington. The median forecast from 78 economists surveyed by Bloomberg projected a 1.5 percent increase.

Carmakers Decline

Volkswagen fell 0.8 percent to 166.60 euros. BMW, the largest maker of luxury cars, dropped 0.8 percent to 70.88 euros. Daimler AG, the third-biggest, lost 1.3 percent to 47.41 euros.

Dialog Semiconductor extended losses, falling 5.3 percent to 11.60 euros. Shares slid 3.9 percent yesterday after Cirrus Logic Inc., which provides audio-chips for Apple’s iPhone, slumped in U.S. trading following a warning on increased pricing pressure in the smartphone market.

SAP AG slid 3.2 percent to 58.68 euros, the most in four months, after saying its cloud-computing chief and founder of SuccessFactors Inc., a software provider it bought last year, is leaving the company as part of a management overhaul.

Lars Dalgaard is stepping down effective June 1 to become an investor, the world’s largest maker of enterprise-management software said today.

Siemens AG led gains on the DAX, rising 1.4 percent to 82.45 euros as a gauge of industrial goods and services companies advanced on the Stoxx Europe 600 Index.

Linde AG, which is competing with Air Liquide SA to be the world’s biggest industrial gas producer, advanced 1 percent to 152.05 euros. Sanford C. Bernstein & Co. raised its rating of the shares to outperform, the equivalent of a buy recommendation, from market perform, forecasting a target price of 178 euros apiece.

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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