Germany's DAX Set for Biggest Slump Since 2001; Allianz Drops

By Alexis Xydias

Oct. 10 (Bloomberg) -- German stocks were poised for the steepest drop since Sept. 11, 2001, as concern deepened the credit crisis will drag the global economy into recession and some investors are being forced to dump assets.

Deutsche Bank AG, the country's largest lender, and Allianz SE, Europe's biggest insurer, sank more than 10 percent. MAN AG slid 8.6 percent after the region's third-largest truckmaker said it will reduce its workforce and cut production.

The benchmark DAX Index dropped 352.17, or 7.2 percent, to 4,534.83 at 9:38 a.m. in Frankfurt. A close at this level would be the steepest decline since the 8.5 percent slump after the New York terror attacks in 2001. The HDAX Index of the country's 110 biggest companies decreased 7.5 percent to 2,268.9.

``A very dangerous mix has taken place in the money and credit markets and hedge funds are clearly withdrawing flows from equities,'' said Francisco Salvador, director at Venture Finanzas SA in Madrid. ``We are waiting for some rational order to be restored, and very abrupt sell-offs are always followed by abrupt rebounds, but meanwhile we'll see panic.''

The DAX is poised for a 22 percent drop this week, the steepest such slump on record, on concern efforts by central banks and governments to shore up the banking system won't prevent an economic standstill. The benchmark is down 44 percent this year as a financial crisis sparked by U.S. subprime-mortgage defaults blocked money markets and threatened the solvency of banks and other businesses.

Deutsche Bank, the country's largest bank by assets, sank 11 percent to 33.25 euros. Allianz fell 11 percent to 69.30 euros. Morgan Stanley reduced its share-price estimate for the insurer 9.2 percent to 129 euros ``to reflect the decline in equity markets and other assets.''

`Weaker Order Intake'

MAN retreated 8.6 percent to 36.32. The truckmaker said it plans to reduce output by cutting temporary staff as freight companies delay orders because of the financial crisis.

``We've definitely seen a weaker order intake in the last couple months,'' MAN Chief Executive Officer Hakan Samuelsson said in a Bloomberg Television interview. ``We see that our customers are very concerned'' about the economy.

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, fell 8.9 percent to 19.61 euros. Daimler AG, the second-biggest, slipped 8.8 percent to 22.44 euros. Porsche SE, the maker of the 911 sports car, declined or 7 percent to 49.38 euros. Citigroup Inc. cut its share-price estimates and earnings projections for the carmakers, citing the outlook for sales.

DIC Asset AG rose 1.6 percent to 5.82 euros. The commercial- property investor that counts Siemens AG among its tenants said it plans to buy back as much as 5 percent of its shares.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.