German Stocks Fall, Led by Munich Re, Deutsche Bank, Lufthansa

By Henrietta Rumberger

July 25 (Bloomberg) -- German stocks declined for a second day, led by banks and insurers, after Munich Re cut its full-year earnings forecast and Hannover Re said reaching targets has become more difficult.

Munich Re, the world's second-biggest reinsurer, slumped the most in five years and Hannover Re had its steepest plunge since September 2001. Deutsche Bank AG, Germany's largest bank, also added to the drop. Deutsche Lufthansa AG and Bayerische Motoren Werke AG paced a retreat among companies sensitive to higher fuel costs as crude oil rose for a second day.

The benchmark DAX Index decreased 91.27, or 1.4 percent, to 6,349.43 as of 11:58 a.m. in Frankfurt. The measure is on course for a weekly loss of 0.6 percent. DAX futures expiring in September fell 1.2 percent, to 6,393.5. The HDAX Index of the country's 110 biggest companies slipped 1.4 percent to 3,225.31.

``The problem with banking shares is that these companies begin to feel the results of the weakening global economy,'' Tilmann Galler, a client portfolio manager who helps oversee about $25 billion at JPMorgan Asset Management in Frankfurt, said in a Bloomberg Television interview today. ``Loan losses are likely to increase which will weigh on their earnings.''

Banks and insurers were the biggest decliners among the 18 industry groups in Europe's Dow Jones Stoxx 600 Index. U.S. financial shares had their worst drop in eight years yesterday.

Munich Re tumbled 13.93 euros, or 12 percent, to 102.50. The reinsurer cut its forecast for earnings this year after second- quarter profit declined 48 percent. Net income was about 600 million euros ($942 million), the company said today, warning of ``substantial'' writedowns on its stock investments.

Ergo, Hannover Re

Ergo Versicherungsgruppe AG, Munich Re's primary insurance unit, lost 6.70 euros, or 4.9 percent, to 130 after lowering its full-year earnings projection.

Hannover Re plunged 5.09 euros, or 16 percent, to 27.20. Germany's second-biggest reinsurer after Munich Re said it has become more difficult to reach its full-year targets because of capital-market turbulence.

``We are currently evaluating our forecast,'' spokeswoman Christine Harms said in a telephone interview today.

Allianz SE, Europe's largest insurer, sank 9.19 euros, or 8 percent, to 105.20.

Deutsche Bank fell 1.66 euros, or 2.8 percent, to 58.54. Commerzbank AG, Germany's second-biggest bank, slipped 1.72 euros, or 7.7 percent, to 20.43 euros. Hypo Real Estate Holding AG, the country's second-biggest commercial-property lender, dropped 65 cents, or 3.7 percent, to 16.92 euros.

Crude Oil

Lufthansa, Europe's second-largest airline, retreated 45 cents, or 2.9 percent, to 15.17 euros. BMW, the world's biggest luxury carmaker, sank 47 cents, or 1.4 percent, to 30.06 euros.

Crude oil gained for a second day in New York on concern supply in Iran and Nigeria may be disrupted.

Separately, Lufthansa faces an open-ended strike by employees starting July 28, putting pressure on the carrier to achieve a pay deal with workers.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Gildemeister AG (GIL GY) retreated for a second day, declining 90 cents, or 4.9 percent, to 17.50 euros. The machine- tool maker had its stock recommendation cut to ``sell'' from ``buy'' at Equinet AG.

Hochtief AG (HOT GY), Germany's biggest builder, declined 3.12 euros, or 5.7 percent, to 51.39 euros after the Australian Financial Review reported that the company may have to invest to avoid losing its controlling stake in Australian business Leighton Holdings Ltd.

``The question is how much Hochtief will have to spend to keep Leighton consolidated,'' said Norbert Kretlow, an analyst at Commerzbank AG with an ``add'' recommendation on the stock.

Infineon Technologies AG (IFX GY) climbed 19 cents, or 3.9 percent, to 5.02 euros, the second advance this week. Europe's second-biggest semiconductor maker said it will cut 10 percent of its workforce to reduce costs after its third-quarter loss tripled. Profit excluding losses and charges linked to its memory chip unit Qimonda AG Europe's second-largest maker of semiconductors was 45 million euros in the third quarter, while analysts had estimated 29 million euros.

Phoenix Solar AG (PS4 GY) advanced 1.31 euros, or 3.2 percent, to 42.71, the biggest gain in more than a week, after the maker of sunlight-powered electricity plants signed a framework supply contract valued at about 450 million euros with Solyndra Inc. of the U.S.

Premiere AG (PRE GY) lost 50 cents, or 4.2 percent, to 11.40 euros. Equinet lowered its recommendation on shares of Germany's biggest pay-television company to ``reduce'' from ``hold.''

To contact the reporters on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.