LONDON (AP) — Another slide in Volkswagen’s share price combined with renewed worries over China’s economy to roil global markets Tuesday.
KEEPING SCORE: In Europe, Britain’s FTSE 100 index of leading British shares was down 2.1 percent at 5,978 while the CAC-40 in France fell 3 percent to 4,446. Germany’s DAX was down 2.9 percent at 9.657. U.S. stocks were poised for big losses at the bell too with Dow futures and the broader S&P 500 futures down 1.3 percent.
VW IN CRISIS: Volkswagen AG, the world’s top-selling carmaker, issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the center of a U.S. emissions scandal. It said it was setting aside around 6.5 billion euros ($7.3 billion) to cover the fallout from the scandal that is tarnishing VW’s reputation for probity, raised questions over the future of its CEO Martin Winterkorn and seriously undermining its share price. In the wake of its statement, VW’s share price was down another 18.7 percent at 108.75 euros and near a four-year low. The fall comes on top of Monday’s hefty 17 percent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.
NOT JUST VW: The shockwaves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled. Germany’s Daimler AG, the maker of Mercedes-Benz cars, was down 6 percent, while BMW AG fell 5.3 percent. France’s Renault SA was 5.5 percent lower.
ANALYST TAKE: “Although VW may have lost a big chunk of its value, its shares could plunge even further if it is forced to pay a lot more than the 6.5 billion euros it has set aside to handle the consequences of rigging U.S. emissions tests or if there are criminal charges for VW executives,” said Fawad Razaqzada, an analyst at Forex.com. “And things could turn really ugly if the probe expands to and finds other German carmakers guilty too.”
CHINESE FACTORIES: Investors are also fretting over China ahead of monthly manufacturing data from China on Wednesday, which will give the latest update on a pillar of the world’s No. 2 economy. Caixin’s preliminary index based on a survey of factory purchasing managers will be closely watched for any signs of improvement after sinking to a six-year low in August. Fed officials cited China’s struggling economy as one factor in its decision to delay hiking rates.
ASIAN SCORECARD: Major regional indexes ended higher, with Hong Kong’s Hang Seng up 0.2 percent at 21,796.5. The Shanghai Composite Index in mainland China was up 0.9 percent to 3,185.62. South Korea’s Kospi added 0.9 percent to 1,982.06 and Australia’s S&P/ASX 200 rose 0.7 percent to 5,103.60. Markets in Japan remain closed for a three-day holiday.
ENERGY: Benchmark U.S. crude oil lost $1.14 to trade at $45.54 a barrel in electronic trading on the New York Mercantile Exchange. Brent Crude, a benchmark for international oils used by many U.S. refineries, fell 83 cents to $48.09 in London.
CURRENCIES: The euro slipped to 0.3 percent to $1.1156 while the dollar fell 0.5 percent to 119.91 yen.
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