German stocks decline 12% from this year's peak; Volkswagen, Daimler fall

Bloomberg News (Frankfurt) - German stocks fell, with the benchmark DAX Index (DAX) dropping 12 percent from this year's high, as concern escalated that the U.S. economy is faltering and the nation may lose its top credit rating.

ThyssenKrupp AG (TKA) and Salzgitter AG (SZG), Germany's biggest steelmakers, dropped with metal prices. Daimler AG and Volkswagen AG (VOW) led a selloff in European carmakers. Axel Springer AG (SPR) rose 9.7 percent after saying that first-half operating profit climbed 11 percent.

The DAX declined 2.3 percent to 6,640.59 at the 5:30 p.m. close in Frankfurt, its lowest close since March 16. The measure has dropped 12 percent since this year's high on May 2 as investors speculated that Europe's sovereign-debt crisis would derail its economic recovery. A drop of 10 percent from the most recent peak is known as a correction by analysts. The broader HDAX Index lost 2.4 percent today.

"Stalling economic growth across the pond has put a lot of pressure on equities and shifted the attention back to recession issues again," said Anita Paluch, a sales trader at ETX Capital in London. "In Europe, additional strain is coming from the fact that seemingly averted Greek problems are still floating around."

Moody's Investors Service said the outlook for the U.S. debt grade is negative after President Barack Obama yesterday signed into law a plan to lift the nation's borrowing limit and cut spending following months of wrangling between Republican and Democrat lawmakers. Moody's and Fitch Ratings affirmed their AAA credit ratings for the U.S., while warning that downgrades were possible if politicians failed to implement debt-reduction measures and the economy weakened.

U.S. Services, Factories

German stocks extended their losses after a report showed that U.S. service industries expanded in July at the slowest pace since February 2010, a sign that the largest part of the U.S. economy had little momentum at the start of the second half of the year.

A separate release showed that American factories received fewer orders in June, reflecting declining demand for machinery and computers that signal manufacturing may struggle to accelerate. Data from ADP Employer Services showed that companies in the U.S. added 114,000 workers to their payrolls in July. The increase followed a revised 145,000 gain in June that was lower than previously reported.

Salzgitter slid 7.6 percent to 43.30 euros, the lowest price since April 2009. ThyssenKrupp plunged 4.5 percent to 27.26 euros, its lowest price since March. A gauge of basic- resource shares was the second-worst performing of 19 industries in the Stoxx Europe 600 Index today as aluminum, copper, lead, nickel, tin and zinc all retreated on the London Metal Exchange.

Daimler, Volkswagen Drop

The preferred shares of Volkswagen, Europe's biggest carmaker, sank 4.6 percent to 126.30 euros. The stock has retreated 9.4 percent this week, its biggest three-day decline since November 2009. Daimler AG (DAI), the third-largest maker of luxury cars, tumbled 4.4 percent to 45.33 euros.

The preferred shares of Fuchs Petrolub AG (FPE) slumped 9.8 percent to 32.93 euros, its largest retreat since May 2009, as the maker of lubricants reported second-quarter net income and earnings before interest and taxes that missed analysts' estimates.

Axel Springer, Europe's largest newspaper publisher, jumped 9.7 percent to 31.77 euros, the biggest gain since May 2009. Earnings before interest, taxes, depreciation and amortization increased to 288.7 million euros ($413 million) from 261.2 million euros a year earlier, the Berlin-based company said in a statement today. Sales increased 12 percent to 1.53 billion euros.

Heidelberger Druckmaschinen AG (HDD) surged 4.2 percent to 1.78 euros, rebounding from its lowest price since at least 1998. The maker of printing presses acquired CSAT GmbH, based in Eggenstein near Karlsruhe, which employs 70 people, the company said in an e-mailed statement today, adding that both parties agreed to keep the purchase price confidential.