Decline in Automakers Lead European Markets Down

Lucy Stoeva
14 Jan, 2016
New York City

European markets plunged on weakness in auto makers, oil price jitters, and volatile Shanghai market. Renault is allegedly investigated for emission-related fraud. The Bank of England kept its interest rates at 0.5%. The German economy expanded at the fastest pace in five years.

[R]4:00 PM Frankfurt – European markets plunged on weakness in auto makers, oil price jitters, and volatile Shanghai market. Renault is allegedly investigated for emission-related fraud. The Bank of England kept its interest rates at 0.5%. The German economy expanded at the fastest pace in five years.[/R]

European stock markets fell sharply on Thursday on weakness of the automobile sector, the continuous decline of oil prices, and the volatility of the markets in China.

Renault led the decline, down 8.9%, on unconfirmed reports that investigators searched the offices of the French vehicle maker in relation to emissions fraud.

The discovery that German auto producer Volkswagen was concealing the level of toxic emissions in some of its vehicles prompted investigations in different countries and manufacturers.

The automobile sector across Europe suffered losses with Peugeot down 3.5%, Fiat Chrysler Automobiles losing 6.8%, and Volkswagen shedding 2.9%.

In China, trading was volatile and the Shanghai Composite Index touched lows from last summer before recovering and closing 2% higher.

Oil prices were also unstable with Brent futures falling to below $30 a barrel last night and rebounding to $31.22 by the late afternoon.

The Bank of England maintained its key interest rate at a record low of 0.5%. The bank also kept unchanged its £375 billion asset purchase program.

In Germany, the economy expanded by 1.7% in 2015, compared to an increase of 1.6% in 2014, according to preliminary data of the Federal Statistical Office.

The increase represents the fastest growth since 2011 and was driven mainly by domestic consumption. Imports grew 5.7%, while exports were up 5.4%, said the department.

On the production side, industry gained 2.2%, while construction fell by 0.2%. The services sector expanded by 2.2%.

In London, FTSE 100 index lost 59.63, or 1%, to 5,901.34 and in Germany, the DAX index declined 180.88, or 1.82%, to 9.780.08.

In Paris, the CAC 40 index fell 78.73, or 1.79%, to 4,313.21.

Lundin Petroleum AB surged 13.6% to 106 Swedish kronor after the Norwegian Statoil ASA bought an 11.93% stake in the oil company for 4.6 billion Swedish kronor or $539.3 million.

Through the deal, Statoil takes advantage of the current depressed Lundin price and increases its share in the North Sea''s Johan Sverdrup oil field and the Edvard Grieg field.

Restaurant Group Plc plunged 16.8% to 531 pence after the company said it is more cautious about 2016 outlook due to a more difficult trading environment, including new wage regulations, global uncertainty, and the possible exit of the U.K. from the EU.

Tesco Plc jumped 4.1% to 165 pence after the largest U.K. based supermarket chain said sales were ahead of expectations in the Christmas season and the retailer is on target for 2016 profit.

Sales at UK stores open more than a year rose 1.3% in the Christmas period, while analysts were expecting a decline of 1% to 3%. International same store sales increased 4.1%.

Customer transactions jumped 3.4% and volume soared 3.5%, mainly due to price cuts, extra temporary staff of 4,000 people, and wider Christmas promotions.