DAX Stock Benchmark Declines, Led by Volkswagen, SAP Shares

By Stefanie Haxel

Oct. 21 (Bloomberg) -- German stocks erased earlier gains as concern that an economic slowdown in Europe may limit profits overshadowed government measures to bolster banks.

Volkswagen AG tumbled 13 percent as investors continued to short-sell the shares in Europe's biggest carmaker. SAP AG fell for the first time in four days as CA Cheuvreux lowered its share-price estimate for the world's largest maker of business- management software.

The DAX Index declined 67.08, or 1.4 percent, to 4,767.93 as of 3:30 p.m. in Frankfurt after rising as much as 1.5 percent earlier. DAX Index futures expiring in December lost 1.4 percent to 4,799. The HDAX Index of the country's 110 biggest companies fell 1.2 percent to 2,399.12.

Stocks pared gains after Caterpillar Inc., the world's largest maker of bulldozers and excavators, reported earnings that trailed estimates and forecast revenue in Europe to fall in 2009, saying many economies in the region may be in recession by the end of the year.

``While the risk premium paid by investors for financial stocks is narrowing, it's still widening for non-financial companies,'' said Matthias Jasper, head of equities at WGZ Bank in Dusseldorf. ``We expect further negative earnings surprises in the third quarter.''

The DAX, the benchmark for German equities, is down 41 percent this year as credit losses and writedowns at financial firms worldwide reach $660 billion and on concern that bank bailouts in the U.S. and Europe may fail to prevent a recession.

VW

Volkswagen lost 36.41 euros, or 13 percent, to 240.68. Europe's largest carmaker yesterday dropped the most in two decades as investors short-sold the shares on speculation that the price will decline once Porsche SE gains control of Europe's biggest carmaker.

``Investors are still short-selling,'' said Marc-Rene Tonn, a Hamburg-based analyst with M.M. Warburg. ``VW is a more volatile stock than others, it has long de-linked itself from fundamentals.''

SAP AG dropped 1.10 euros, or 4 percent, to 26.55 euros, snapping a two-day increase. CA Cheuvreux cut its share-price estimate for the world's largest maker of business-management software 13 percent to 34 euros.

Hannover Re plunged 2.18 euros, or 9.8 percent, to 20 euros, the largest drop since Oct. 10. Germany's second-biggest reinsurer abandoned its 2008 profit target after losing money in the first nine months of the year on a sharp declined in stock investments and above-average catastrophe losses.

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

Arques Industries AG (AQU GY) dropped 51 cents, or 13 percent, to 3.42 euros, the lowest in more than a week. The investment company's Eurostyle division sought protection from creditors for its French units.

Beiersdorf AG (BEI GY) rose 68 cents, or 1.7 percent, to 39.87, the highest in a week. The maker of Nivea skin creams agreed to sell its Bode Chemie skin-disinfectant unit to German medical-products maker Paul Hartmann AG.

Bilfinger Berger (GBF GY) rose for a third day, climbing 3.99 euros, or 15 percent, to 31.01. The country's second- largest construction company lifted its profit forecast for this year after it agreed to sell its Razel engineering unit in France to Fayat SA for 137 million euros ($182 million).

Deutsche Bank AG (DBK GY) advanced 1.88 euros, or 5.6 percent, to 35.78. CA Cheuvreux upgraded Germany's biggest bank, adding the stock to its ``country selected list'' from a previous ``underperform'' recommendation.

Commerzbank AG (CBK GY), the country's second-largest, increased 51 cents, or 5.3 percent, to 10.18 euros.

Deutsche Boerse AG (DB1 GY) surged 3.09 euros, or 5.8 percent, to 55.99. Analysts at Citigroup Inc. confirmed a ``buy'' recommendation and a 90 euro price estimate on Europe's biggest exchange by market value.

``We believe the stock looks very attractively valued for the earnings profile and franchise it is offering,'' analysts Daniel Garrod and Haley Tam wrote in a research note today.

Freenet AG (FNT GY) gained 35 cents, or 6.7 percent, to 5.61 euros, the steepest gain in a week. The mobile-phone and Internet operator is close to selling its DSL high-speed internet unit to either United Internet AG or Telecom Italia SpA, Handelsblatt reported, citing unidentified people in the industry.

K+S AG (SDF GY) climbed a second day, adding 1.94 euros, or 5.6 percent, to 36.52. Commerzbank analyst Stephan Kippe reiterated a ``buy'' recommendation on Europe's largest producer of fertilizers, saying he expects ``the global potash scenario to remain robust in 2009.''

``The current valuation discounts a massive reduction in potash prices - a scenario we regard as unrealistic,'' he wrote in a note to clients dated yesterday.

Lanxess AG (LXS GY) rose 34 cents, or 2.5 percent, to 14.07 euros. Germany's biggest publicly traded specialty chemicals maker resumed production at its Orange and Baytown sites in Texas after the company last month declared force majeure because of damage caused by Hurricane Ike.

To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.