German Stock Market Pain Seen Just Beginning Should Greece Exit
Inyoung Hwang Writes:
The tumble in German stocks has already breached a level that constitutes a correction and could go another 10 percent should Greece exit the euro.
So say Ralf Zimmermann of Bankhaus Lampe KG and UniCredit Bank AG?s Christian Stocker, who forecast the DAX Index could slip as low as 10,000. Even in a more likely scenario where Greece and its creditors compromise, the decline probably isn?t over and the benchmark gauge may hit 10,500, Zimmermann said.
A rebound in the euro coupled with losses in German bunds has made the DAX the second worst-performing index among developed markets this quarter. Now Greek debt negotiations are stalling, and European officials are preparing for a potential default and exit from the euro.
?The deadline is approaching, and it?s crunch time,? said Zimmermann, an equity strategist at Bankhaus Lampe in Dusseldorf. ?The move from mid-April was driven by the crash in the German bond market. If there is a Grexit, that would be an add-on.?
German equities have more at stake after the nation?s index more than tripled from a low in 2009 through a record in April, while the Euro Stoxx 50 Index just doubled. A level of 10,000 would mark a 19 percent drop from the DAX peak. The gauge lost 1.5 percent at 9:09 a.m. in Frankfurt.