German Stocks Decline as Focus Shifts to U.S. Deficit

German stocks retreated from a five-year high as investors shifted focus from the U.S. budget deal averting most scheduled tax increases to upcoming negotiations on lowering the nation’s deficit.

K+S AG lost 3.5 percent after Citigroup AG lowered its recommendation on the stock. Fresenius Medical Care AG fell 1.4 percent. Wacker Chemie AG, the second-biggest maker of solar-grade silicon, rose as prices of the material gained and UBS AG added it to its list of most preferred European chemical stocks.

The DAX Index declined 0.3 percent to 7,756.44 at the close of trading in Frankfurt. The measure rallied 29 percent in 2012, its best annual performance since 2003, as the European Central Bank and the Federal Reserve expanded asset purchases. The broader HDAX Index dropped 0.2 percent today.

“When you look at the actual details of the deal struck, it just doesn’t look as if we’re doing anything more than a short-term kicking of the can down the road,” Stewart Richardson, chief investment officer at RMG Wealth Management LLP said on “On the Move” with Francine Lacqua on Bloomberg Television.

German stocks rose the most in six weeks yesterday after the U.S. Congress agreed a budget bill that avoids most scheduled tax increases threatening a recovery in the world’s largest economy. Still, the package won’t reduce deficits enough to avoid a sovereign-rating downgrade, Moody’s Investors Service said yesterday.

Republicans are planning to use the need to raise the nation’s $16.4 trillion debt ceiling to try to force President Barack Obama to accept spending cuts. Congress must act as early as mid-February to prevent a default.

Fraught Months

“The next several months are going to be potentially fraught in terms of the spending cuts negotiations, the debt ceiling, and it’s just the cold reality of the day that there is a lot of work to be done,” said Richardson.

Unemployment in Germany increased less than economists forecast in December. The number of people out of work rose a seasonally adjusted 3,000 to 2.942 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 10,000, the median of 19 estimates in a Bloomberg News survey showed. The adjusted jobless rate held steady at 6.9 percent, close to a two-decade low.

K+S, Europe’s largest potash maker, dropped 3.5 percent to 33.89 euros. Citigroup cut its recommendation on the shares to neutral from buy after potash producers agreed to sell to China’s Sinofert Holdings Ltd. at a price that’s $70 a ton below a March agreement.

Fresenius Medical Care, the world’s biggest supplier of kidney dialysis, lost 1.4 percent to 51.44 euros.

Solar Gains

Wacker Chemie rose 5.1 percent to 53.47 euros, its highest level since Sept. 18. The stock was added to UBS AG’s “most preferred” list of European chemical shares.

The price of polysilicon climbed to $15.38 per kilo from $15.35, its first weekly increase in 11 months, SK Securities Co. said in a report today, citing data from research firm PV Insights.

SMA Solar Technology AG advanced 12 percent to 21.08 euros, its largest rise since July 20. Solarworld AG, Germany’s biggest maker of solar panels, added 15 percent to 1.25 euros, its largest advance since November 2011.

Warren Buffett’s MidAmerican Energy Holdings Co. said yesterday that it agreed to spend as much as $2.5 billion to build two solar projects in California that are set to be the world’s largest photovoltaic development.

“Investors’ attention has shifted to the solar industry following Buffett’s acquisition,” Thomas Brandt, a sales trader at Tavira Securities in London, said today. “The sector is also getting a boost from higher price for polysilicon, which could indicate stronger demand for panels.”

Infineon Technologies AG, Europe’s second-biggest maker of semiconductors, climbed 2 percent to 6.52 euros.

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