BLBG:German Stocks Fall Before Euro Meeting; Banks, SAP Drop
German stocks declined, halting a two-day rally before today’s euro-area meeting, amid renewed concern that Greece will leave the European currency union after comments from former Prime Minister Lucas Papademos.
Deutsche Bank AG and Commerzbank AG, Germany’s largest lenders, slid. Deutsche Boerse AG fell 3.5 percent. SAP AG, the biggest maker of business software, dropped 0.9 percent. Thyssenkrupp AG (TKA) fell after Fitch Ratings downgraded its outlook to negative from stable.
The DAX Index (DAX) retreated 1.8 percent to 6,321.36 at 1.12 p.m. in Frankfurt, snapping two days of gains that saw it rise 2.6 percent. The broader HDAX Index decreased 1.7 percent today.
“Comments made by Papademos about the possibility of Greece leaving the euro zone being more likely are a major reason why the DAX Index has had losses,” said Christian Schmidt, a market analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt. “Market sentiment about today’s summit is also not that positive.”
Papademos said that while it is unlikely the nation will leave the euro, it’s still a risk, according to a report in the Wall Street Journal yesterday.
European leaders are meeting in Brussels today to discuss the region’s debt crisis that has wiped almost $4 trillion from equity markets worldwide this month.
“We believe the decline in the German equity market is not justified by either economic or corporate fundamentals,” said Rob Smith, investment manager, Germany, at Baring Asset Management.
Bank Losses
Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro.
While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations.
“A Greek exit would be a Pandora’s box,” said Jacques- Pascal Porta, who helps manage $570 million at Ofi Gestion Privee in Paris, including shares in Deutsche Bank and BNP Paribas SA. “It’s a disaster that would leave the door open to other disasters. The euro’s credibility will be weakened, and would set a precedent: Why couldn’t an exit happen for Spain, for Italy, and even for France?”
Deutsche Bank fell 2.1 percent, the most in more than a week, to 29.05 euros. Commerzbank lost 2 percent to 1.42 euros.
“Banks are under pressure because it is unclear what the future will bring in terms of Greece,” Spain and Italy, said Helaba’s Schmidt.
Deutsche Boerse Falls
Deutsche Boerse dropped 3.5 percent to 39.54 euros. Germany’s main stock exchange may fall out of the Euro Stoxx 50 next week, as it continues to suffer declining equity volumes and increased competition from new trading platforms in Europe, said Petra Grafin von Kerssenbrock, a technical analyst at Commerzbank AG in Frankfurt.
SAP dropped 0.9 percent to 47.39 euros. Its acquisition of Ariba Inc. for $4.3 billion would be the largest enterprise software deal since Hewlett-Packard Co. bought Autonomy Corp. for more than $10 billion last year, according to data compiled by Bloomberg.
“There are fears in the market about the prospect of a counter bid by Oracle,” said Schmidt.
ThyssenKrupp fell 4.3 percent to 14.75 euros. Fitch reduced the outlook of Germany’s largest steelmaker to negative from stable, while affirming its long-term rating at BBB-.
To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
