– German Stocks Fall as Merkel’s Party Loses Home-State Election (Bloomberg, September 5, 2011):
Sept. 5 (Bloomberg) — German stocks retreated to the lowest level since November 2009 after German Chancellor Angela Merkel’s party suffered its fifth election loss this year and European services and manufacturing growth weakened in August.
Deutsche Bank AG fell to the lowest since March 2009 as the lender is among 17 sued by the U.S. for $196 billion. BASF SE and Bayer AG lost more than 2 percent after Clariant AG, a Swiss maker of chemicals and paints, cut targets for sales and profitability this year.
The benchmark DAX Index slid 3.8 percent to 5,328.13 as of 2:23 p.m. in Frankfurt, a third straight decline. The gauge has retreated 29 percent from this year’s high on May 2 as reports in Europe and the U.S. spurred concern the economic recovery is stalling. The drop has left the DAX at about 8.2 times the estimated earnings of its companies, the lowest valuation since Bloomberg began collecting the data in 2006. The broader HDAX Index declined 3.8 percent today.
“Most data points to more risk to the downside at the moment,” said Matthias Joerss, Frankfurt-based strategist at Macquarie Group Ltd. “The German elections will stiffen the resistance within the CDU and the FDP to the bailout discussions but the main drivers today are the lawsuits the Federal Housing Finance Agency announced on Friday evening against 17 financial institutions. The weak European PMI data aren’t helping either.”
The Social Democrats, Merkel’s main opponents nationally, took 35.7 percent to win yesterday’s election in Mecklenburg- Western Pomerania, preliminary results show. The chancellor’s Christian Democratic Union had 23.1 percent, its worst tally since voting began in the state in 1990 after reunification that year between West Germany and the former communist East Germany.
A composite index based on a survey of euro-area purchasing managers in both industries fell to 50.7 from 51.1 in July, London-based Markit Economics said today. It had initially reported an unchanged reading of 51.1. A reading above 50 indicates growth.
Deutsche Bank, Germany’s biggest bank, plummeted 7.8 percent to 23.99 euros, the lowest price in more than two years, as it was among 17 banks to be sued by the U.S. to recoup money spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac.
The Frankfurt-based lender declined to comment on a Financial Times report that the U.K. Serious Fraud Office is examining Deutsche Bank’s packaged securities deals for signs of wrongdoing. The SFO hasn’t started an official investigation and is at the stage of gathering evidence, the FT said.
Chief Executive Officer Josef Ackermann, speaking at a financial conference in Frankfurt, said market conditions such as volatile stocks and sovereign debt remind him of the financial crisis in the fall of 2008.
“The ‘new normal’ is characterized by volatility and uncertainty — not only in respect to market developments, but also in consideration of the future of the financial branch,” Ackermann said today at a conference in Frankfurt organized by Euroforum. “All this reminds one of the fall of 2008, even though the European banking sector is significantly better capitalized and less dependent on short-term liquidity.”
Commerzbank AG, Germany’s second-biggest lender, sank 5 percent to 1.83 euros. Banking shares posted the worst performance among 19 industry groups in the benchmark Stoxx Europe 600 Index today, losing 4.9 percent as a group.
BASF, the world’s biggest chemicals maker, and Bayer sank 4.4 percent to 44.98 euros and 2.7 percent to 41.67 euros, respectively. Competitor Clariant forecast full-year sales of 7 billion francs ($8.9 billion) to 7.2 billion francs, down from an earlier range of 7.8 billion francs to 8 billion francs. Clariant lowered its margin target range to 12.8 percent to 13.2 percent from an earlier 13.5 percent to 14.5 percent.
Henkel AG lost 5.8 percent to 37.90 euros, the lowest in a year. Preferred shares of the maker of Loctite glues and Persil detergent were downgraded to “neutral” from “outperform” at Exane BNP Paribas.
Infineon Technologies AG slumped 6.3 percent to 5.33 euros as Europe’s second-largest chipmaker was downgraded to “sell” from “buy” at Berenberg Bank AG.