German Shares Tumble as the Economy Shrinks Down

The biggest economy of Europe, Germany has seen their stocks tumbling the most in last 2 months. According to reports, the German economy has contracted in the last quarter of 2012. Not only that, but, the country is currently facing a sovereign debt crisis. The benchmark gauge of Germany, the DAX Index has plummeted by 1.2% and is at 7637.88 currently. This is the biggest decline for the DAX Index since 16th November. Thanks to the US budget deal, the index has experienced a total gain of 0.4% in 2013. The broader HDAX Index also had similar fate, as it retreated by 1.1%. The total volume of shares exchanging hands was 34% more in comparison with the average of last 30 days.

According to Robert Halver, who is the Head of Baader Bank AG’s Capital Markets Research Department, the GDP figures have created disappointment among the investors. However, he added that in recent times, only 4th quarter of 2012 showed negative growth. So, this may probably be a negative blink only and not become a sustainable trend in future. The GDP report was announced from the Federal Statistics Office and it showed a decline of 0.5% in GDP of 2012’s last quarter. Incidentally, the overall expansion for 2012 was of 0.7%, a little less than the initial forecasts of 0.8%.

The largest developer of business management software in the world, SAP AG recorded its biggest decline in a year as the reported earnings were less than the initial projections. RWE AG also experienced a decline of 3.2% as their shares were downgraded by both Exane BNP Paribas and JPMorgan. Where, Exane BNP Paribas downgraded the RWE shares to neutral, JPMorgan cut it to underweight. Both the companies stated that the high debt and deteriorating earnings outlook were the main reasons behind this downgrade.

The fate of Infineon Technologies was however better as it experienced a gain of 1.4%. The gain was caused by Exane’s decision to recommend Infineon shares, the 2nd largest manufacturer of semiconductor in Europe. The 2nd largest steelmaker of Germany, Salzgitter AG, however went down by 3.2% marking the 4th consecutive day of loss. After selling 24.5% of its stake in Slovensky Plynarensky Priemysel AS, EON SE experienced a decline of 1.4%. Incidentally, the stake was sold to the 2nd largest Czech utility Energeticky & Prumyslovy Holding AS.