German Stocks Retreat on Concern Over Periphery Sovereign Debt; BASF Falls

German stocks retreated as concern that European governments will struggle to repay their debt overshadowed an increase in U.S. consumer confidence and the fastest rate of economic growth in Germany since reunification.

The benchmark DAX Index fell 0.4 percent to 6,110.41. The gauge posted a weekly loss of 2.4 percent, its biggest drop in six weeks, after the Federal Reserve said the pace of recovery in the U.S. economy will probably be “more modest” than forecast. The HDAX Index slipped 0.3 percent today.

Stocks fell even after German gross domestic product surged 2.2 percent from the first quarter. The country has benefited from a recovery in global demand after last year’s recession just as the euro’s drop against the dollar in 2010 has made its exports more competitive outside the region. At the same time, European governments are cutting spending to rein in ballooning budget deficits, threatening to slow growth in coming months.

“Pessimists are back in the market,” said Philipp Musil, who helps oversee about $10 billion at Semper Constantia Privatbank AG in Vienna. “After the earnings season, we are getting less good news from the corporate side and concerns about deflation and GDP growth are back. We could see a downside risk of 5 to 10 percent in the worst-case scenario.”

Italian government bonds declined today as demand dropped at sales of 2015 and 2025 debt. Italy received bids worth 1.27 times the securities offered at an auction of 2025 bonds, compared with a bid-to-cover ratio of 1.74 when it last sold the securities on May 13. The 2015 notes attracted a bid-to-cover ratio of 1.25, compared with 1.41 at the last sale on July 14.

U.S. Consumer Sentiment

The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment climbed to 69.6 following a reading of 67.8 in July that was the lowest since November. The gauge was forecast to rise to 69, according to the median of 65 economists in a Bloomberg News survey.

BASF SE, the world’s biggest chemicals company, slid 1.7 percent to 43.80 euros. Germany’s policy of shutting down nuclear plants, winding down coal-powered energy production and subsidizing renewable energy will result in a long-term de- industrialization of the country, Boersen-Zeitung reported, citing BASF Chief Executive Officer Juergen Hambrecht.

Volkswagen AG, Europe’s largest carmaker, dropped 1.2 percent to 77.02 euros. The company said it doesn’t expect auto markets to reach pre-crisis levels this year after its sales growth last month slowed to 2.9 percent.

ThyssenKrupp Gains

E.ON AG and RWE AG, Germany’s largest utilities, fell 1.6 percent to 22.70 euros and 0.8 percent to 53.22 euros. The two stocks together account for more than 12 percent of the benchmark DAX Index by weighting, according to Bloomberg data.

ThyssenKrupp AG increased 1.5 percent to 23.15 euros. The country’s biggest steelmaker raised its earnings outlook for the current fiscal year after reporting quarterly profit that beat analysts’ estimates.

K+S AG advanced for the first time this week, adding 2.5 percent to 42.33 euros after Europe’s largest potash producer was upgraded to “neutral” from “underperform” by analysts at Exane BNP Paribas.

Carl Zeiss Meditec AG rose 1.2 percent to 11.80 euros as the maker of medical lasers to correct vision defects was raised to “overweight” from “neutral” at HSBC Holdings Plc.