German Stocks Snap Two-Day Advance as Merck, Lufthansa Decline

By Julie Cruz

Nov. 17 (Bloomberg) -- German stocks declined for the first time in three days as Federal Reserve Chairman Ben S. Bernanke said “economic challenges remain.”

The benchmark DAX Index fell 0.3 percent to 5,789.13 as of 9:22 a.m. in Frankfurt, trimming yesterday’s 2.1 percent gain. A 58 percent rally since March 6 left the gauge valued at about 55 times its companies’ earnings, the highest level since December 2003, according to weekly data compiled by Bloomberg. The broader HDAX Index dropped 0.4 percent today.

“The flow of credit remains constrained, economic activity weak and unemployment much too high,” Bernanke said in a speech yesterday to the Economic Club of New York. “Future setbacks are possible.” He added that the Fed is “attentive” to changes in the dollar’s value and “will help ensure that the dollar is strong.” Merck KGaA slumped 2.5 percent to 65.09 euros as the German drug and chemicals maker was downgraded to “underweight” from “equal-weight” at Morgan Stanley, which cited “overly optimistic expectations” for Erbitux and Mylinax drugs.

Deutsche Lufthansa AG slipped 1.1 percent to 11.19 euros. Europe’s second-largest airline isn’t planning to purchase Scandinavian partner SAS Group, Boersen-Zeitung reported, citing an interview with board member Christoph Franz.

Separately, the carrier also plans to increase the density of seats on European flights and make them thinner, as it combats cheaper competitors, Die Welt reported.

Smartrac NV added 1.3 percent to 15.72 euros. The company said it raised about 20.9 million euros ($31.2 million) in gross proceeds from a sale of bearer shares. The company successfully placed 1.4 million shares priced at 15.5 euros apiece with qualifying investors, it said.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net.