Concern is rising among German business leaders that the diplomatic row between Germany and the US over Iraq may damage commercial relations between the countries.
US investors, annoyed at Berlin's opposition to a war in Iraq, may retaliate by ditching German stocks already tainted by concern over the health of Europe's biggest economy, market analysts said.
The German Chancellor Gerhard Schroeder underscored his government's resistance to a conflict in Iraq today, saying he would fight to prevent war.
But fund managers and traders said the German government's unrelenting stance could further inflame relations with the US and may lead to US investors off-loading their holdings in German firms.
"There is a clear risk of that (US investors selling German equities). We are already seeing that in the real economy with suppliers of goods or services being discriminated against because they are German," said Mr Victor Moftakhar, fund manager at Deka Group.
"This could spill over into many other related areas, also the stock market."
German-U. relations have been strained over Iraq since August last year, with Mr Schroeder's anti-war stance helping him to get re-elected in September.
Although France also opposes war, German fund managers did not expect French equities to be hit.
"The French at least have left the door open. Germany has always acted as a proxy for the US in Europe - it was an unwritten contract which has now been broken," said Mr Moftakhar.