German Stocks Decline as Economy Contracts; Metro, Douglas Shares Retreat

German stocks dropped, afteryesterday��s biggest rally in a week, as a report showed thatEurope��s largest economy contracted in the final quarter of2011, indicating it may be headed for a recession.

Metro AG (MEO), the nation��s largest retailer, slid after UBS AGadvised selling the shares. Douglas Holding AG (DOU) tumbled 9.8percent after the retailer said earnings this year will decline.Deutsche Bank AG and Commerzbank AG advanced.

The benchmark DAX Index (DAX) dropped 0.2 percent to 6,152.34 atthe close in Frankfurt. The gauge earlier gained as much as 0.3percent as Germany received bids for more than twice the debt ithad planned to sell at an auction. The DAX retreated 15 percentlast year as euro-area leaders struggled to contain the region��sdebt crisis. The broader HDAX Index was little changed today.

��Certainly from a clients�� perspective, European marketsare a bit overbought, especially from the point of thefundamentals of the debt crisis,�� said Will Hedden, a salestrader at IG Index in London. ��We were expecting overallEuropean Union growth figures not to be great, but if Germanyitself will struggle, what��s left for the others?��

Stocks slipped after a report showed that the debt crisiscaused the economy to contract 0.25 percent in the fourthquarter from the third. Growth slowed to 3 percent in 2011, theFederal Statistics Office in Wiesbaden said in an unofficialestimate.

Economists including Christian Schulz at Berenberg Bankpredict that gross domestic product will contract again in thecurrent quarter. A recession is defined as two consecutivequarters of declining GDP.

German Debt Sale

Germany received bids for 8.97 billion euros ($11.4billion) of five-year notes at an auction today, more thandouble its sale target of 4 billion euros, the Bundesbank said.It sold the 0.75 percent notes maturing in February 2017 at anaverage yield of 0.90 percent.

David Riley, head of the sovereign-debt unit at FitchRatings, today said the Europea! n Centra l Bank should increaseits purchases of government bonds to ease pressure on yields.

��We need to have a credible buyer put in place and wedon��t have that at the moment,�� which is ��why we have a numberof sovereigns under review,�� Riley said at an event inFrankfurt today. ��The ECB needs to be more actively engaged,but it can��t save the euro on its own.��

Metro, Douglas Fall

Metro (MEO) retreated 3.3 percent to 28.36 euros. The stock wascut to ��sell�� from ��neutral�� at UBS. Analysts Benjamin Peters and Mike Tattersall wrote in a report that the shareswill probably ��come under increasing pressure from earningsdowngrades.��

Douglas Holding tumbled 9.8 percent to 25.39 euros, itsbiggest decline since June 2001. Europe��s largest retailer ofmakeup and perfumes said earnings this year will drop as itsThalia book shop division struggles with consumers�� shift tobuying literature online.

Deutsche Bank, the nation��s biggest lender, rose 1.7percent to 27.94 euros. Commerzbank, Germany��s second largest,surged 5.1 percent to 1.3 euros. UniCredit SpA, Italy��s biggestbank, gained 5.5 percent as its shares were upgraded by SanfordC. Bernstein & Co. and WestLB AG. The bank plans to raise 7.5billion euros in a rights issue.

Hochtief AG (HOT) advanced 3.4 percent to 46.88 euros, gainingfor a second day. The construction company will form a venturewith its owner, Actividades de Construccion & Servicios SA, tobuild power lines, allowing it to benefit from the change inenergy policy in Germany, the Financial Times Deutschland said,citing a Hochtief spokesman it didn��t name.