European Markets Decline, Auto Stocks Weak
Paris (Sept 22) The European markets were firmly in negative territory on Tuesday, led by auto stocks, after Germany's Volkswagen admitted to manipulating emission tests norms for diesel cars in the US Talks that the European Central Bank is preparing to scale up monetary stimulus did little to stem the decline.
On a light day for economic news, UK budget deficit exceeded expectations in August, data published by the Office for National Statistics showed. Public sector net borrowing excluding public sector banks increased by 1.4 billion pounds from last year to 12.1 billion pounds in August. It was forecast to rise to 9.2 billion pounds.
Germany's real wages advanced 2.7% in the second quarter from last year, which was the fastest growth since the series began in 2008. Wages increased 2.5% in the first quarter.
The Euro Stoxx 50 index of eurozone bluechip stocks declined 2.61%, while the Stoxx Europe 50 index, which includes some major UK companies, retreated 2.32%.
The German DAX and the French CAC 40 declined about 3% each and the FTSE 100 index of the UK retreated 2%. Switzerland's SMI plunged 2.7%.
In Frankfurt , Volkswagen, which admitted to manipulating emission tests norms for diesel cars in the US, declined 5.4%. BMW declined 4.3% and Daimler dropped 3.7%. Continental slid 3.3%.
Volkswagen said it plans to set aside a provision of some 6.5 billion euros to cover the necessary service measures and other efforts to win back the trust of its customers. The company's earnings targets for 2015 will be adjusted accordingly.
RWE and E.ON dropped 3.7% and 3%, respectively.
Commerzbank dropped 1.7% while Deutsche Bank was moderately lower.
In Paris , Renault plunged 6% and Peugeot lost 7.2%. Auto parts maker Valeo fell 4%.
Lender Societe Generale declined 3.3%. BNP Paribas and Credit Agricole dropped 2.5% and 2.3%, respectively.
In London , miners were trading weak. Glencore plunged 8.6%, while Antofagasta and Anglo American dropped 6.3% each. BHP Billiton fell 4.1%.
Rolls Royce declined 2%, amid a regional rout for auto stocks.
Mitchells & Butlers , an operator of managed restaurants and pubs, fell 3.2%. The company expects fiscal 2015 results to show growth on last year although to be at the bottom end of the range of current market expectations.
Meanwhile, RSA Insurance gained 1.4%. The company plans to attract bids after Zurich Insurance Group said it does not intend to make an offer to acquire RSA.
In Zurich, Roche fell 3.2% and Novartis dropped 4%, as Hillary Clinton plans to propose today price limits as well as research-and-development spend guidelines for the pharmaceutical industry.
The Asian stocks closed a tad higher, as tentative signs of stability in global markets and market talk that the European Central Bank is preparing to scale up monetary stimulus helped offset worries over global growth.
In the US, futures point to a lower open on Wall Street . In the previous session, the Dow rose 0.8% and the S&P 500 added half a percent, while the tech-heavy Nasdaq inched up marginally.
Crude for November delivery lost USD1.16 to USD45.80 per barrel, while December gold dropped USD3.8 to USD1129.0 a troy ounce.