German stocks dropped, erasing yesterday’s rebound, led by a selloff in Fresenius Medical Care AG and Lanxess AG.
Fresenius Medical, the world’s biggest provider of kidney dialysis, tumbled 8.7 percent after the U.S. government proposed cutting payments for dialysis-center operators next year, while major shareholder Fresenius SE slid 3.5 percent. Lanxess lost 5 percent after Citigroup Inc. cut its 2013 and 2014 earnings estimates for the maker of synthetic rubber.
The DAX dropped 0.9 percent to 7,910.77 at the close of trading in Frankfurt. The equity benchmark rose 0.3 percent yesterday as 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 of the U.S. economy strengthens in line with its forecasts. The broader HDAX Index 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.”
Fresenius Medical dropped 8.7 percent to 49.71 euros, its biggest drop since August 2002, 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,” said Robert Sepucha, Fresenius’ senior vice president for government affairs in the U.S.. “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 3.5 percent to 92.14 euros, its largest decline in almost a year. 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.
Lanxess lost 5 percent to 44 euros. Citigroup reiterated its sell recommendation on the shares and cut its 2013 and 2014 earnings estimates by 9 percent and 7.5 percent respectively. Analysts cited a bigger-than-expected decline in butadiene and said global prices of the ingredient “remain in freefall.”
RWE AG dropped 4.1 percent to 22.30 euros, its lowest price since September 2011, after Morgan Stanley lowered its recommendation for Germany’s second-biggest utility to equal weight, similar to a hold rating, 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 2 percent to 12.18 euros today.
Hannover Re dropped 3.2 percent to 54.34 euros after JPMorgan Chase & Co. downgraded the world’s fourth-largest reinsurer to underweight, the equivalent of a sell rating. The bank also cut its recommendation for Munich Re to neutral as it reduced its earnings forecast for the reinsurance industry by 10 percent.
Talanx AG slid 6.2 percent to 22.99 euros after major shareholder HDI Haftpflichtverband der Deutschen Industrie VaG sold 8.2 million shares, about 3.2 percent, in the insurer at 23.25 euros apiece.
Commerzbank AG dropped 4.6 percent to 6.16 euros, extending its record low. Germany’s second-biggest lender has tumbled 51 percent since its high in January and is now trading at a relative strength index, or RSI, of 23, the lowest since March. An RSI below 30 could signal a rebound on some occasions and a long-term downtrend on others, according to traders who follow technical analysis.