European stocks sink on China downgrade, VW scandal

GMT 11:00 2015 Tuesday ,22 September

Arab Today, arab today European stocks sink on China downgrade, VW scandal

European stock markets
London - AFP

European stock markets tumbled Tuesday with carmakers and miners in freefall on the worsening Volkswagen scandal and a bleak outlook for China's economy, dealers said.

Frankfurt's benchmark DAX 30 index sank 3.17 percent to 9,633.29 points in midday trading, with carmaker Volkswagen collapsing by a fifth after revealing as many as 11 million diesel cars had been equipped with devices  that could skew emissions data.

The Paris CAC 40 shed 2.89 percent to 4,453.08 compared with Monday's close.

London's FTSE 100 dived 2.31 percent to stand at 5,967.41 points approaching midday in the capital, with miners suffering sharp falls after the Asian Development Bank (ADB) slashed its growth forecasts for China.

"If a downgrade from the ADB weren’t bad enough for global stock markets, knocking the mining sector sharply lower on prolonged global growth fears, the auto sector has hit full reverse as Volkswagen's woes continue," Michael Hewson, analyst at traders CMC Markets analyst, told AFP.

VW issued a profits warning "amid wider concerns that its problems might point to wider malpractice in the rest of the industry", said Hewson.  

In midday deals, VW shares plunged 20.6 percent to 104.8 euros as the group also set aside 6.5 billion euros ($7.3 billion) in provisions in the third quarter to cover potential costs arising from the scandal.

The troubled company -- whose stock had already dived 17 percent Monday -- warned it would have to adjust its annual profit targets accordingly.

The fast-moving scandal sent rival European carmakers plunging on growing worries over the sector.

German carmakers BMW and Daimler sank by 6.56 percent and 6.29 percent to stand at 78.86 euros and 66.77 euros, respectively.

In Paris, French peers Peugeot and Renault shed 10.80 percent and 8.44 percent to stand at 13.55 euros and 65.60 euros.

"It’s an auto sector shaking incident that is the main contributor to Tuesday’s bearish trading -- and something that looks like it could rumble on for some time," said Connor Campbell, analyst at dealers Spreadex.

Elsewhere in Europe, Milan's main shares index slid 2.91 percent, Madrid lost 2.73 percent and Athens dropped 2.06 percent.

 - Growth worries hit miners -

 Mining companies were also among the heaviest fallers after the ADB forecast Asian growth would hit 5.8 percent this year and 6.0 percent in 2016. March's forecast was for 6.3 percent for both years.

It tipped China -- the main driver of global economic growth -- to expand by 6.8 percent this year. That was downgraded from 7.2 percent after a stream of weak indicators including on trade, inflation, investment and consumer spending.

The news weighed heavily on mining and metal groups around Europe because China is a major consumer of commodities such as copper and gold.

In London, mining giant Glencore saw its share price nosedive 8.91 percent to 108.40 pence, topping the FTSE 100 fallers' board.

Anglo American dropped 6.88 percent to 647.10 pence and Antofagasta shed 6.81 percent to 527 pence.

In Paris, shares in ArcelorMittal -- the world's biggest steelmaker -- lost a hefty 6.22 percent to 5.45 euros.

Steel group Thyssenkrupp shed 2.81 percent to 16.60 euros in Frankfurt trades.

In foreign exchange activity on Tuesday, the European single currency eased to $1.1191 from $1.1195 late in New York on Monday.

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