German Stocks Drop on Cyprus Bank Deposit Levy ConcernsJonathan Morgan
German stocks declined the most in more than two weeks after the euro area forced Cyprus to adopt a levy on bank deposits, prompting concern that the region’s debt crisis will reignite.
Deutsche Bank AG fell the most on the benchmark DAX Index. Volkswagen AG, the world’s second-biggest carmaker, slipped to its lowest since Nov. 19 after saying it will recall vehicles in China.
The DAX Index dropped 0.4 percent to 8,010.7 at the close of trading in Frankfurt, paring earlier losses of as much as 1.8 percent. The benchmark measure has still gained 5.2 percent this year amid optimism central banks around the world will continue to support economic growth. The broader HDAX Index lost 0.3 percent today.
“The decision of the politicians in the euro zone to build up a bailout package for Cyprus with a participation of bank depositors is something new,” Roger Peeters, chief executive officer at Close Brothers Seydler Research in Frankfurt, wrote in an e-mail. “Since the weekend, there is more uncertainty about the safety of bank deposits. This looks set to unsettle markets.”
The volume of shares changing hands in companies on the DAX was 12 percent lower than the average of the last 30 days, data compiled by Bloomberg showed.
While Cyprus accounts for less than half a percent of the 17-nation euro area’s economy, the raid on bank accounts risks a resumption of the financial crisis that began in 2009 in Greece. Moody’s Investors Service said that the move limits support for bank creditors across Europe and shows that policy makers will risk disrupting financial markets to avoid sovereign defaults.
Deutsche Bank fell 1.9 percent to 33.46 euros as a gauge of banking stocks fell the most of the 19 industry groups in the Stoxx Europe 600 Index.
Commerzbank AG declined 0.3 percent to 1.20 euros, paring earlier losses of as much as 2.4 percent. Credit Suisse Group AG downgraded its recommendation on the stock to neutral from outperform, citing concern over the bank’s recent 2.5 billion euros ($3.2 billion) rights offer, and saying it wanted to see evidence of earnings stabilization before investing in the shares.
Allianz SE, Europe’s largest insurer, retreated 1.7 percent to 110.30 euros. Munich Re, the world’s biggest reinsurer, lost 0.6 percent to 149.35 euros. A gauge of European insurance companies declined the second most on the Stoxx 600.
Volkswagen slipped 0.7 percent to 159.25 euros. The carmaker said in a March 16 statement that it will conduct a voluntary recall related to its direct-shift gearbox system in China.
Deutsche Telekom AG retreated 0.8 percent to 8.51 euros. Revenue for January and February at Germany’s largest telecommunications company fell 6.7 percent, compared with a targeted 5 percent decline, Wirtschaftswoche reported, citing internal monthly reports.
Lufthansa AG advanced 2.4 percent to 16.55 euros, for the biggest gain on the DAX. UBS AG upgraded its recommendation on Europe’s second-biggest airline to buy from neutral, citing positive developments in its efforts to reduce its cost base.
Evotec AG, a drug research and development company, advanced 7.8 percent to 2.57 euros, its biggest gain since July 10. Chief Executive Officer Werner Lanthaler returned to work today after taking a leave of absence in October due to illness.
Henkel AG, the Dusseldorf-based maker of Persil detergent, gained 1.2 percent to 73.44 euros after Nomura Holdings Inc. raised its target price on the shares to 74 euros from 68 euros.