German Stocks Drop to Seven-Week Low as Merck DeclinesNamitha Jagadeesh
German stocks declined to a seven-week low as Merck KGaA and Deutsche Telekom AG fell, following European health-care and telecommunications stocks lower.
Merck and Deutsche Telekom each retreated at least 1.5 percent. ThyssenKrupp AG declined 1.4 percent as UBS AG lowered its 12-month price estimate on the shares. Lanxess AG rose 1.8 percent after Berenberg Bank advised investors to buy the stock.
The DAX Index retreated 0.6 percent to 9,127.91 at the close in Frankfurt, paring an earlier loss of as much as 1.3 percent. The gauge has tumbled 6.3 percent from a Jan. 17 high amid weaker-than-forecast Chinese data, a reduction in Federal Reserve bond purchases and a rout in emerging-market currencies. The broader HDAX Index slipped 0.5 percent today.
“What we’re seeing is a necessary correction,” Hendrik Koenig, an equity strategist at B. Metzler seel. Sohn & Co. in Frankfurt, said. “German-market multiples were way above their historical averages. The slide in emerging-market currencies should have an effect on European earnings. However, the upward trend of the German equity market should stay intact as the low interest-rate environment remains in 2014.”
The DAX trades at 12.7 times the estimated earnings of its members, compared with a five-year average of 11.8 times, according to data compiled by Bloomberg. The gauge ended 2013 at a multiple of 14.1, the highest since December 2009.
Gauges of health-care and telecommunications shares posted the worst performances among 19 industry groups in the Stoxx Europe 600 Index. Merck lost 1.8 percent to 114.45 euros and Fresenius Medical Care AG slid 1.5 percent to 51.82 euros.
Deutsche Telekom, Germany’s biggest phone company, declined 1.5 percent to 11.50 euros.
ThyssenKrupp declined 1.4 percent to 18.90 euros after UBS cut its 12-month price estimate to 12 euros a share from 15 euros, citing a capital increase in December and the company’s retention of a loss-making Brazilian steel unit. Shares of the German steelmaker gained 2.9 percent last week and climbed to a two-month high yesterday.
Lanxess advanced 1.8 percent to 49.02 euros after Berenberg upgraded the chemicals maker to buy from hold, saying it expects a strong recovery in the company’s earnings because of improving demand and a drop in capital expenditure.
The volume of shares changing hands in DAX-listed companies was 34 percent greater than the average of the past 30 days, data compiled by Bloomberg showed.