German Stocks Fall as Deutsche Bank Shares Tumble on Loss
German stocks slid, following the benchmark DAX (DAX) Index’s biggest weekly gain in almost a month, as Deutsche Bank AG (DBK) dropped after posting an unexpected quarterly loss, and a report showed economic growth in China slowed.
Deutsche Bank sank 5.4 percent after the country’s largest lender said legal costs and accounting charges contributed to a surprise loss in the fourth quarter. Allianz SE retreated 0.9 percent, following its European peers lower after Fitch Ratings warned that investments are becoming riskier amid low interest rates. Lanxess AG (LXS) slipped 3 percent after Nomura Holdings Inc. cut its rating on the shares.
The DAX fell 0.3 percent to 9,715.9 at the close of trading in Frankfurt. The benchmark gauge rose 2.9 percent last week as the World Bank increased its estimate for global growth in 2014 and a U.S. report showed home construction capped the best year for the industry since 2007. The broader HDAX Index also lost 0.3 percent today.
“There is some hesitation in the market in the short term and we need some confirmation that the economy is improving,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “The China data is not bad, but it’s not good either. It’s a mixed view, so it’s not enough to support equity markets today.”
China’s gross domestic product rose 7.7 percent in the fourth quarter from a year earlier, the National Bureau of Statistics said today in Beijing, compared with 7.8 percent in the third quarter. That still exceeded the median estimate of analysts in a Bloomberg News survey.
Deutsche Bank dropped 5.4 percent, the most since Sept. 2012, to 37.21 euros. In an announcement 10 days ahead of schedule, the lender reported a pretax loss of 1.15 billion euros ($1.56 billion), compared with the average estimate of six analysts surveyed by Bloomberg for a 628.5 million-euro pretax profit.
This year “will be another headwind year -- revenues, litigation, regulation, deleveraging costs -- for Deutsche Bank and the investment banking industry overall,” UBS AG analysts including Daniele Brupbacher wrote in a report to clients.
Commerzbank AG (CBK), the country’s second-largest lender, declined 4.5 percent to 12.94 euros. Aareal Bank AG, which offers real estate financing and consultancy services, slipped 2.5 percent to 28.59 euros. A measure of European banks fell the most of the 19 industry groups on the Stoxx Europe 600 Index.
“The banking sector is reacting to Deutsche Bank,” Duchesne said. “Some pullback and profit taking in the sector is to be expected.”
Allianz, Europe’s biggest insurer, retreated 0.9 percent to 132.75 euros. A gauge of European insurers posted the third-worst performance on the Stoxx 600. “Generating sufficient investment yield in the current low interest rate environment is the biggest challenge currently facing the European insurance sector,” Fitch said.
Lanxess retreated 3 percent to 48.25 euros. Nomura cut its rating on the chemical company to reduce, similar to sell, from neutral, citing a loss of pricing power amid lower demand. Currency swings in the first half of 2014 may cut industry revenue by as much as 3 percent, according to the brokerage.
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