German Stocks Fall Amid U.S. Cuts; Deutsche Bank DropsJonathan Morgan
German stocks declined, with the benchmark index paring its weekly gain, amid investor concern U.S. spending cuts may slow the world’s largest economy.
Deutsche Bank AG fell to its lowest level since December as Goldman Sachs Inc. downgraded the stock. Volkswagen AG and Bayerische Motoren Werke AG dropped 1.9 percent and 2.1 percent, respectively, as a gauge of carmakers was among the biggest decliners in the Stoxx Europe 600 Index. RWE AG added the most in more than a month as Citigroup Inc. upgraded the shares.
The DAX Index fell 0.4 percent to 7,708.16 at the close of trading in Frankfurt, after earlier losing as much as 1.5 percent. The gauge has still risen 0.6 percent this week, and added 1.3 percent so far this year as U.S. lawmakers agreed on a budget avoiding automatic fiscal changes that had threatened to push the world’s biggest economy into a recession. The broader HDAX Index also retreated 0.4 percent today.
“I think the concerns in the short term are overblown,” Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen, wrote in a message. “The U.S. economy will not fall apart because of one month’s sequester.”
In the U.S., Democrats and Republicans are in a standoff over how to replace the so-called sequester, totaling $1.2 trillion over nine years, $85 billion of which would occur in the remaining seven months of this fiscal year. Republicans rejected Democrats’ call for higher taxes on top earners to replace part of the spending reductions.
Stocks pared losses after a report showed manufacturing in the U.S. expanded at a faster pace than forecast in February, reaching the highest level since June 2011 as factories boosted production.
The Institute for Supply Management’s factory index advanced to 54.2, from 53.1 in January, the Tempe, Arizona-based group said today. The figures exceeded the most optimistic forecast in a Bloomberg survey in which the median projection was 52.5. A reading greater than 50 signals expansion.
In China, manufacturing growth unexpectedly slowed last month. The official purchasing managers’ index slipped to 50.1 in February from 50.4 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. The reading compared with the 50.5 median estimate in a Bloomberg News survey of 31 economists. A number above 50 means that activity increased.
Deutsche Bank fell 4.3 percent to 33.57 euros. Goldman Sachs downgraded the shares to sell from neutral. Germany’s biggest lender may have to transfer $13 billion to a unit in the U.S. to meet capital rules for foreign banks proposed by the Federal Reserve, according to a note by the investment bank.
“There is a cluster of bad news about Deutsche Bank today,” Andreas Lipkow, a senior market strategist at Kliegel & Hafner AG in Berlin, said. “As well as the Goldman Sachs note, there is the political situation in Europe. It is better if you stand on the sidelines of the market and avoid financial stocks in the short-term.”
Volkswagen, Europe’s biggest automaker, declined 3.15 euros to 164.10 euros. BMW, the largest manufacturer of luxury cars, lost 1.50 euros to 69.20 euros.
Deutsche Telekom AG retreated 1.3 percent to 8.12 euros. Paulson & Co. will vote to block MetroPCS Communications Inc.’s merger with Deutsche Telekom’s T-Mobile USA, saying the combined company would hold too much debt.
RWE, Germany’s largest utility, gained 1.8 percent to 28.64 euros. Citigroup upgraded its recommendation on the shares to neutral from sell, saying that recent management changes and comments from the company indicated RWE will pursue a fiscally prudent strategy.
The volume of shares changing hands on the DAX was 0.3 percent less than the average over the past 30 days, according to data compiled by Bloomberg.