The investors have more reasons to be concerned over the US budget deal. Many are predicting that the current deal won’t suffice to reduce the fiscal deficit of the biggest economy in the world. This concern seems to have started affecting the stocks of other countries and the European powerhouse Germany seems to be the latest victim. The benchmark index of Germany, the DAX experienced a slump of 0.6% and finished at 7732.66. Despite today’s loss, the gauge has still been able to gain around 1.6% in 2013, thanks to the earlier surge experienced after the finalization of US budget deal on last day of 2012. On the other hand, the broader HDAX index has dropped by 0.5% today.
According to the Head of Trading Department of Fpm Frankfurt Performance Management AG, Guillermo Hernandez, the investors were hoping that the US policy makers will come up with a permanent solution to the fiscal cliff problem. However, as of now, it seems that the policy makers have just bought some time as 2012 was ending.
On the other hand, the chiefs of the Global Central Bank have agreed to ease the liquidity rules of the banks so that the economic recovery across the world is not stifled. Therefore, the lenders now can use an expanded range of assets including the securitized mortgage debts and equities, so that the liquidity coverage ratio can be met. The banks have been given 4 years to comply with this measurement as well.
Two of the biggest lenders of Germany, Commerzbank and Deutsche Bank saw increases of 4.2% and 2.8% respectively. According to the Chief Executive Officer of Close Brothers Seydler Research, Roger Peters, the investors are now focusing more on the financial industry and therefore the banking stocks are expected to consolidate further.
The 2nd biggest carmaker in the world, Volkswagen AG however experienced a slump of 1.6% and is at 175.95 Euros per share now. CitiGroup incidentally downgraded its stock from buy to neutral and this decision had a negative impact on the share prices. The 2nd largest utility of Germany, RWE AG also declined by 3% to finish at 30.94 Euros per share. Incidentally, HSBC Holdings downgraded its stock from overweight to neutral. Air Berlin, on the other hand, declined by 3.7% and is at 1.50 Euros currently.