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German Stocks Retreat Amid Speculation Fed Will Taper

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Dec. 11 (Bloomberg) -- German stocks declined in the final hour of trading as investors speculated that the U.S. Federal Reserve may decide to reduce its monthly bond purchases at next week’s meeting.

C.A.T. Oil AG dropped the most in four years as two of its managers sold shares at a 20 percent discount to yesterday’s closing price. European Aeronautic, Defence & Space Co. rallied the most a year as the owner of Airbus SAS said it targets a payout ratio as high as 40 percent.

The DAX Index slipped 0.4 percent to 9,077.11 at the close in Frankfurt. The volume of shares changing hands in companies listed on the DAX was 20 percent lower than the average of the past 30 days, according to data compiled by Bloomberg. The equity benchmark dropped 0.9 percent yesterday. The broader HDAX Index decreased 0.2 percent today.

“The decline was an overreaction to market speculation on December tapering,” Stephane Ekolo, chief European strategist at Market Securities in London, said in a phone interview. “It’s credible, but this is just like a game we play with these tapering guesses.”

Federal Reserve policy makers meet on Dec. 17-18 to decide whether to reduce their monthly asset purchases. The proportion of economists predicting a Fed decision to slow the bond-buying program next week climbed to 34 percent in a Bloomberg survey conducted on Dec. 6. Some 17 percent in the preceding survey on Nov. 8 said the Fed would taper at the December meeting.

U.S. Budget

Republican and Democrat negotiators late yesterday reached a deal to limit automatic spending cuts for the next two years. The agreement would reduce the cuts by $60 billion in total over two years and lower the deficit by as much as $23 billion if both chambers of Congress approve it.

C.A.T. Oil sank 12 percent to 19.90 euros. A holding company for the two managers said it raised 108 million euros ($149 million) by selling six million shares at 18 euros apiece.

Bilfinger SE fell 1.8 percent to 80.66 euros after UBS AG downgraded Germany’s second-biggest builder to neutral from a buy rating. The brokerage cited the shares’ rally. They surged 16 percent from the end of June through yesterday.

EADS jumped 7.5 percent to 52.75 euros after announcing at an investor day that it intends to increase its dividend until it achieves a payout ratio of 30 percent to 40 percent.

To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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