German Stocks Fall Amid U.S. Shutdown, Boehner WarningJonathan Morgan
German stocks declined to a three-week low as U.S. House Speaker John Boehner ruled out raising the federal government’s debt limit without preconditions.
Norma Group SE dropped 2.1 percent after HSBC Holdings Plc downgraded the shares. Deutsche Bank AG slid 1.6 percent after Canaccord Genuity Corp. cut its rating on Germany’s largest lender. EON SE and RWE AG climbed 4.1 percent and 5.2 percent, respectively, after the Frankfurter Allgemeine Zeitung reported that European Commissioners want to limit the fixed prices paid to clean-energy suppliers.
The DAX Index retreated 0.4 percent to 8,591.58 at the close of trading in Frankfurt, after earlier falling as much as 1.3 percent. The equity benchmark slipped for a second week last week as a standoff between U.S. lawmakers led to the first government shutdown in 17 years. The broader HDAX Index lost 0.3 percent today.
“The showdown in Washington is increasing volatility in the markets after a deal could not be reached over the weekend,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “There is a sense that the political fight could last until October 17 and the debt ceiling comes into play.”
U.S. Democrat and Republican lawmakers continue to clash over how to resolve the shutdown, a deadlock that investors speculate will seep into talks to raise the country’s $16.7 trillion debt ceiling.
Boehner, a Republican, ruled out passing a bill to increase the borrowing limit without attaching other conditions. His party is calling for changes to President Barack Obama’s health-care act before agreeing to a new budget.
“We are not going to pass a clean debt limit,” Boehner said in an interview on ABC yesterday. “The votes are not in the House to pass a clean debt limit.”
The Obama administration has said it won’t negotiate with Republicans over funding the government or raising the debt ceiling, arguing that it is part of the basic function of Congress and shouldn’t be used as leverage.
The Treasury has said it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the U.S. will run out of money to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
U.S. earnings season starts tomorrow with Alcoa Inc. scheduled to release third-quarter results after the market closes.
Norma Group dropped 2.1 percent to 34.46 euros. HSBC downgraded the manufacturer of plastic and metal-based components to underweight, similar to a sell rating, from neutral, saying that investors have now recognized the company’s growth potential and margin resilience.
Deutsche Bank slipped 1.6 percent to 34.09 euros as Canaccord cut its rating on the shares to hold from buy. Commerzbank AG, Germany’s second-largest lender, fell 1.9 percent to 8.92 euros.
TAG Immobilien AG, a Hamburg-based property owner, slid 4.2 percent to 8.85 euros, its biggest drop since June 2012. Welt am Sonntag newspaper reported that Chief Executive Officer Rolf Elgeti owns stakes in about 20 companies that buy and manage real estate. Most of the deals were done before he joined TAG, according to the report.
Elgeti said in an e-mail to Bloomberg News that all the transactions were communicated to and cleared by TAG’s board. “There are no conflicts of interest,” he said.
EON and RWE, Germany’s two biggest utilities, advanced 4.1 percent to 13.81 euros and 5.2 percent to 26.93 euros, respectively. FAZ reported on Oct. 7 that European Commissioners Joaquin Almunia and Guenther Oettinger want to limit the fixed prices paid to clean-energy suppliers.
Wholesale energy costs have declined almost 60 percent since peaking in 2008 as a boom in renewable energy in Germany boosted supplies at the same time as the financial crisis cut demand to its lowest level since 2009, according to AG Energiebilanzen e.V., an association of energy lobbies and research institutes.
The VStoxx Index, which gauges the cost of protecting against swings on the Euro Stoxx 50 Index, jumped 3.1 percent to 20.16 today. The volume of shares changing hands in DAX-listed companies was 3 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.