German Stocks Slide for Second Day as VW Shares DeclineJonathan Morgan
German stocks fell as the nation’s top court heard a challenge to the European Central Bank’s bond-buying program and the closure of Greece’s state broadcaster renewed concern about the stability of the government.
Volkswagen AG dropped 3.3 percent as a gauge of automotive companies was the worst performing industry group in the Stoxx Europe 600 Index. Kabel Deutschland Holding AG jumped to a record after Vodafone Group Plc approached the cable operator about a takeover.
The DAX Index lost 1 percent to 8,143.27 at the close of trading in Frankfurt. The gauge erased earlier gains as Greece’s Pasok and Democratic Left parties, which make up the ruling coalition with Prime Minister Antonis Samaras’s New Democracy, submitted a draft law to overturn the shutdown of public broadcaster ERT. The broader HDAX Index fell 0.7 percent today.
“Greece is very much the front and center of markets this afternoon,” Jeremy Batstone-Carr, head of research at Charles Stanley Group Plc in London, said in a telephone interview. “The prospect of another election sooner rather than later has seen spreads on Greek bonds widen sharply as investors rush for the exit. Greece has always been the canary in the coal mine in Southern Europe.”
The yield on 10-year Greek bonds jumped 39 basis points to 10.41 percent. The government switched off the signal for the nation’s three public television channels overnight and announced plans to suspend 2,600 jobs at ERT and create a smaller company called NERIT.
Bundesbank President Jens Weidmann and ECB Executive Board member Joerg Asmussen testified on the ECB’s Outright Monetary Transactions program at the Federal Constitutional Court in Karlsruhe in hearings which continue for a second day.
“The fear was that out of the two-day hearing, the bond-buying program would be limited within a certain amount, not that it would be made illegal,” Henrik Drusebjerg, who helps oversee $220 billion as a senior strategist at Nordea Bank AB in Copenhagen, said by phone. “This would mean Mario Draghi would have to rephrase the statement he made over the summer from ‘whatever it takes’ to ‘whatever it takes within a certain amount.’”
The DAX rose 5.5 percent in May and has rallied in all but one of the past 12 months as central banks around the world maintained their stimulus efforts. The volume of shares changing hands in companies on the index was 21 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.
Preferred shares of Volkswagen, Europe’s biggest carmaker, retreated 3.3 percent to 159.70 euros, the lowest in four weeks.
Daimler AG, the world’s third-biggest maker of luxury cars, lost 2.1 percent to 47.17 euros. Bayerische Motoren Werke AG, the largest maker of luxury cars, slipped 1.8 percent to 70.16 euros. A gauge of European automotive companies retreated 2 percent, falling the most among the 19 industry groups.
Deutsche Lufthansa AG, Europe’s second-biggest airline, declined 3.8 percent to 15.85 euros after Kepler Cheuvreux downgraded the shares to reduce from hold.
HeidelbergCement AG dropped 5.1 percent 53.23 euros, the largest slide since July 2012. Morgan Stanley cut its recommendation on the stock to equal weight, a rating similar to hold, from overweight.
Kabel Deutschland surged 8.2 percent to 80.84 euros, the highest price since it sold shares to the public in March 2010, after Vodafone, the world’s second-largest wireless carrier, approached it about a takeover. There is no certainty that an offer will be made, the two companies said.