German Stocks Drop After Merkel, Sarkozy Meet; Infineon Falls

Wednesday, 17 Aug 2011 06:54 AM

 

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German stocks dropped after Chancellor Angela Merkel and French President Nicolas Sarkozy rejected a broadening of Europe’s rescue fund and calls for joint euro borrowing.

Deutsche Boerse AG led declines, falling 6.8 percent as the leaders resurrected plans for a financial transaction tax rejected by the European Union in 2010. Deutsche Bank AG, Germany’s biggest lender, fell 2.3 percent. Infineon Technologies AG slid after Morgan Stanley lowered its recommendation on the industry and Dell Inc. cut a forecast.

The DAX sank 1.2 percent to 5,926.12 as of 11:32 a.m. in Frankfurt after dropping as much as 2.1 percent. The gauge has tumbled 21 percent from this year’s high on May 2, entering a so-called bear market on Aug. 8, amid concern that the global economic recovery is stalling as Europe struggles to contain its sovereign-debt crisis. The broader HDAX Index fell 1.1 percent.

Merkel and Sarkozy rejected an expansion of the 440 billion-euro ($633 billion) rescue fund and rebuffed calls for joint euro borrowing to end the debt crisis, saying greater economic integration was needed first.

“Most market participants weren’t expecting the meeting to yield any significant progress on the debt crisis but they also weren’t expecting the idea of a financial transaction tax to resurface either,” Jonathan Sudaria, a dealer at London Capital Group, wrote. “The punitive measure is only likely further to hurt the financial sector.”

Harmonized Tax Rates

Merkel and Sarkozy agreed to press for closer euro-area cooperation, tougher deficit rules and a harmonization of their corporate tax rates. A plan to resubmit a financial-transaction tax, which the European Union rejected in 2010, sent stocks lower in New York trading. The leaders of the euro area’s two biggest economies spoke after a two-hour meeting in Paris.

New shares of Deutsche Boerse, which is seeking to buy NYSE Euronext to create the world’s largest stock and derivatives exchange, fell 6.8 percent to 40.33 euros. Deutsche Bank lost 2.3 percent to 30.04 euros.

Germany’s public banks said they continue to oppose the implementation of a financial-transaction tax in Europe, according to an e-mailed statement from VOeB, an association which represents the lenders.

“Recent regulation means banks are already at their limits with regards to their financial, organizational and personnel abilities,” the group said.

Aixtron

Infineon, Europe’s second-largest chipmaker, slid 3.6 percent to 5.84 euros. The European semiconductor industry was cut to “cautious” at Morgan Stanley, while Dell, the second- largest personal-computer maker, missed analysts’ sales estimates and cut its revenue forecast.

Aixtron SE, the maker of equipment used to produce LED screens, lost 9.3 percent to 15.82 euros. The stock was cut to “hold” from “buy” at Deutsche Bank.

Heidelberger Druckmaschinen AG tumbled 5.8 percent to 1.56 euros after the German maker of printing presses was cut to “sell” from “neutral” at UBS AG.

Nordex SE, a turbine maker, advanced 3.1 percent to 4.24 euros. Vestas Wind Systems A/S, the largest wind-turbine maker, posted second-quarter earnings that beat analysts’ estimates.

 

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