German stocks fell from a record, snapping a three-day winning streak, as bank shares declined and investors weighed quarterly sales and earnings reports.
Deutsche Bank AG and Commerzbank AG each slid more than 2 percent as a gauge of financial stocks fell the most of the 19 industry groups in the Stoxx Europe 600 Index. Allianz SE retreated 0.9 percent after RBC Capital Markets cut its rating and price target on Europe’s biggest insurer. Aixtron SE lost 2.5 percent after peer Cree Inc. forecast quarterly earnings below analysts’ estimates.
The DAX Index slid 0.3 percent to 8,919.86 at the close of trading in Frankfurt. The gauge advanced to a record yesterday as investors speculated that worse-than-forecast U.S. payrolls data could delay a reduction in Federal Reserve bond purchases. The broader HDAX Index also declined 0.3 percent today.
“Bad news hit the tape yesterday and the market was up in every asset class,” Daniel Weston, a portfolio manager at Aimed Capital GmbH in Munich, said by telephone. “Reality set in this morning that things aren’t as rosy as they seem. I see growth coming off and inflation coming off, so it’s a good time to be defensive.”
Asian stocks slid after China’s benchmark money-market rates jumped the most since July as the central bank refrained from adding funds to markets.
The European Central Bank said the definition of capital it uses to stress test banks will be stricter than the one in an imminent review of their assets, as it confirmed that lenders will be required to have a capital ratio of 8 percent.
The capital definition applicable on January 1, 2014 will be used for the asset-quality review, while the definition valid “at the end of the horizon” of the stress test will be used in that evaluation, the Frankfurt-based central bank said in an e-mailed statement today.
The ECB will commence its study in November and conclude the three-part exercise in October 2014 before assuming supervisory powers over the region’s banks. The European Union is scheduled to fully implement global capital rules by 2019.
ECB President Mario Draghi said officials won’t hesitate to fail banks in the stress tests. “Banks do need to fail,” to prove the credibility of the exercise, Draghi said in a Bloomberg Television interview with Francine Lacqua in Frankfurt, after the ECB published plans for its bank-asset check. “If they do have to fail, they have to fail. There’s no question about that.”
Deutsche Bank, Germany’s largest lender, dropped 2.2 percent to 35.85 euros, while Commerzbank, the second biggest, lost 4.1 percent to 9.35 euros.
Allianz retreated 0.9 percent to 123.30 euros. RBC Capital Markets cut its recommendation to sector perform, similar to a hold rating, from outperform and reduced its price target by 4 percent to 125 euros. RBC cited slower annual earnings growth, saying the market value of Allianz-owned Pacific Investment Management Co.’s fixed-income assets will shrink amid rising interest rates.
Deutsche Telekom AG lost 1.3 percent to 11.44 euros, for a fifth day of declines, its longest losing streak since June. Orange, France’s largest telecommunications company, said third-quarter earnings before interest, taxes, depreciation and amortization fell 7.7 percent as cost cuts failed to offset falling sales.
Aixtron slipped 2.5 percent to 10.36 euros. Cree, a U.S. maker of energy-efficient lighting products, forecast second-quarter adjusted earnings will be no more than 41 cents a share, falling short of the average analyst estimate by 3 cents.
Bechtle AG added 4.1 percent to 44.75 euros, its highest price since at least March 2000. The office-supplies retailer said third-quarter pre-tax profit rose to about 24.5 million ($33.7 million) euros from 18.3 million euros a year earlier.
Celesio AG gained 6.1 percent to 21.73 euros, its highest price since May 2010. McKesson Corp., the largest U.S. pharmaceutical distributor, is near an agreement to buy a majority stake in the German drug wholesaler to bundle its purchasing and gain global influence, said two people with knowledge of the discussions.
Borussia Dortmund GmbH climbed 2.9 percent to 3.75 euros. Dortmund beat London-based Arsenal 2-1 last night in soccer’s Champions League.
Merck KGaA rose 1.1 percent to 120.40 euros. The drugmaker’s third-quarter results will be a “substantial beat” compared with market estimates as underlying progress mitigates the impact of unfavorable foreign exchange rates, Deutsche Bank wrote in a note today.