German shares lose 1.94 pc at start of trading on Thursday

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German shares lose 1.94 pc at start of trading on Thursday
« on: February 27, 2020, 10:41:11 PM »
BERLIN, Feb 27 (Xinhua): German stocks continued this week’s negative trend and were off to a shaky start on Thursday, with the benchmark DAX index losing 248.28 points, or 1.94 percent, opening at 12,526.60 points. The biggest and only winner among Germany’s largest 30 companies at the start of trading was German utility RWE, increasing 0.37 percent, followed by energy company E.ON decreasing by 0.82 percent and housing company Vonovia decreasing by 1.04 percent. Shares of Lufthansa fell strongly by 3.29 percent and Germany’s largest airline was the biggest loser at the start of trading. On Wednesday, Lufthansa announced the decision to offer its employees unpaid holidays in order to reduce its costs. To save costs, the airline has also decided that all planned new recruitments would be “re-examined, suspended or postponed to a later date.” Multinational chemical and pharmaceutical company Bayer announced Thursday an increase in group sales of 3.5 percent for the fiscal year 2019. It recorded a growth of net income by 141.4 percent to 4.1 billion euros (4.5 billion U.S. dollars). “We delivered in 2019 and kept our promises in all areas,” commented Werner Baumann, chairman of the board of management of Bayer on Thursday. Earlier this month, Bayer was sentenced by a U.S. court to pay a plaintiff farmer a total of 265 million dollars because the herbicide Dicamba had destroyed his fruit crop. In line with the general negative development of most German stocks, shares of Bayer decreased by 2.59 percent on Thursday. The euro was trading almost unchanged at 1.0883 dollars, decreasing slightly by 0.02 percent on Thursday morning. German Finance Minister Olaf Scholz plans to temporarily suspend a government “debt brake” to hand out tens of billions of euros to struggling municipalities, weekly Die Zeit reported on Wednesday, reports Reuters. With years of fat budget surpluses, Germany has long faced calls at home and abroad to loosen its purse strings, but the spread of the novel coronavirus and its likely impact on economic growth have given them new impetus. “Scholz will present a plan in March,” Die Zeit wrote without citing its sources. Scholz would need two-thirds majorities in both parliament’s directly elected lower house and the upper house representing the states to suspend the debt brake. Anchored in the German constitution at the height of the financial crisis in 2009, the rule prevents government from running a deficit of more than 0.35 percent of the gross domestic product in normal times. Finance Ministry spokeswoman Katja Novak declined to comment on “speculation,” telling AFP “the finance minister will present his proposals for dealing with old debt early this year.” “At present various options are being discussed,” Novak added. Scholz has long backed plans to lift a near-unbearable burden of repayments from 2,500 municipalities by shifting €40 billion ($43.5 billion) of their debts to Berlin. He hopes it would lift a major hurdle to increasing infrastructure spending and eliminating financial and planning bottlenecks in municipalities responsible for projects like roads and schools. Many of the towns affected are in deindustrializing “rust belt” zones, like Germany’s most populous state North Rhine-Westphalia. After years of a no-new-debts policy known as the “black zero,” economists and EU partners are increasingly pressuring Berlin to upgrade aging infrastructure and stimulate its flagging economy with new spending. A manufacturing slowdown in Europe’s top economy and the looming impact of the coronavirus have added urgency to such calls. What is more, the European Central Bank’s monetary policy is already extremely loose, with negative interest rates and mass bond purchases under a “quantitative easing” scheme. With little room to maneuver in Frankfurt, eurozone governments are on the hook to stimulate flagging economic growth, especially in case of a potential hefty shock stemming from an unforeseen event like the virus.

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