German Stocks Decline Amid U.S. Budget Deficit ConcernsJonathan Morgan
German stocks declined as continuing concern that the U.S. budget deal won’t reduce the fiscal deficit quickly enough offset gains in lenders after central banks eased a liquidity rule at a meeting in Switzerland.
Infineon Technologies AG fell 2.2 percent as Bank of America Corp. downgraded the stock. Deutsche Bank AG and Commerzbank AG rose 2.8 percent and 4.2 percent, respectively, after global central bank chiefs agreed to water down and delay a planned bank-liquidity regulation.
The DAX lost 0.6 percent to 7,732.66 at the close of trading in Frankfurt. The gauge has still gained 1.6 percent this year as U.S. lawmakers struck a New Year deal to prevent most scheduled tax increases and delay spending cuts in the world’s largest economy. The broader HDAX Index dropped 0.5 percent today.
“Everyone was hoping that they would find a proper solution before the year-end,” Guillermo Hernandez Sampere, head of trading at Fpm Frankfurt Performance Mgmt AG, who helps manage about 500 million euros ($652 million), said, referring to the U.S. budget discussions. “What they have done is to buy more time. We have not received the solution that the market was looking for.”
Republicans are planning to use the need to raise America’s $16.4 trillion debt ceiling to force President Barack Obama to accept spending cuts to entitlement programs such as Medicare. Congress must act as early as mid-February to prevent a default.
Global central bank chiefs agreed to ease bank liquidity rules to counter warnings that the plan would strangle lending and stifle the economic recovery.
Lenders will be allowed to use an expanded range of assets including some equities and securitized mortgage debt to meet the so-called liquidity coverage ratio, or LCR, following a deal struck by regulatory chiefs meeting yesterday in Basel, Switzerland. Banks will also have an extra four years to fully comply with the measure.
Infineon Technologies, Europe’s second-largest semiconductor manufacturer, lost 2.2 percent to 6.43 euros. Bank of America cut its recommendation on the shares to underperform, the equivalent of a sell rating, from neutral, saying they were fully valued.
RWE AG, Germany’s second-largest utility, lost 3 percent to 30.94 euros as HSBC Holdings Plc. downgraded the stock to neutral from overweight.
Volkswagen AG, the world’s second-biggest carmaker, retreated 1.6 percent to 175.95 euros as Citigroup Inc. downgraded the stock to neutral from buy, citing declining German demand.
Air Berlin Plc fell 3.7 percent to 1.50 euros. Germany’s second-largest airline named Wolfgang Prock-Schauer, the company’s head of strategy, to succeed Hartmut Mehdorn as chief executive officer, ending a 16-month period of transitional leadership.
Deutsche Bank and Commerzbank, Germany’s two biggest lenders, added 2.8 percent to 35.78 euros, and 4.2 percent to 1.58 euros, respectively.
“The financial industry continues to shift into the focus of investors,” Roger Peeters, chief executive officer at Close Brothers Seydler Research in Frankfurt, wrote in a note. “The plans of regulators to ease the liquidity rules for the banking industry should give the whole sector some tailwind at the beginning of the week.”
Evotec AG gained 1.1 percent to 2.77 euros. The drug research and development company said it expanded its collaboration with MedImmune, the global biologics arm of AstraZeneca, after reaching a milestone and obtaining an associated 500,000-euros payment.
Daimler AG advanced 1 percent to 43.06 euros, its highest price in nine months, after state-run Chinese newspaper People’s Daily reported the country’s sovereign-wealth fund may buy a stake in the world’s third-biggest maker of luxury cars.
China Investment Corp. may acquire a holding of 4 percent to 10 percent in Daimler, the People’s Daily said on its website today, citing an unidentified Internet posting.
Dow Jones Newswires reported that CIC is not in talks to buy a stake in the carmaker, citing unnamed people.
Solarworld AG surged 19 percent to 1.66 euros. Germany’s biggest solar-panel maker has climbed 53 percent since Warren Buffett’s MidAmerican Energy Holdings Co. on Jan. 2 said it would invest as much as $2.5 billion in two solar projects in California.
The shares are benefiting from Buffett’s vote of confidence in the industry, said Erkan Aycicek, an analyst at Landesbank Baden-Wuerttemberg AG.
Renewable-energy developers in Germany, the world’s biggest solar market, added a record number of panels last year even after subsidies were cut back.
Solar installations climbed to 7,634 megawatts, up 2 percent from 7,485 megawatts in 2011, according to data today from the Bundesnetzagentur grid regulator and the Environment Ministry. That was more than double the government’s maximum target of 3,500 megawatts.