Auto Makers Drag European Markets Down, Daimler and Kering Disappoint

Lucy Stoeva
22 Apr, 2016
New York City

European stock markets trimmed weekly gains dragged down by auto makers on the widening international investigation in the emission-tests scandal beyond Volkswagen. Zodiac Aerospace soared 10.5% on rumors that Safran may bid for the aerospace supplier.

[R]4:00 PM Frankfurt, Germany - European stock markets trimmed weekly gains dragged down by auto makers on the widening international investigation in the emission-tests scandal beyond Volkswagen. Zodiac Aerospace soared 10.5% on rumors that Safran may bid for the aerospace supplier.[/R]

European stock markets trimmed weekly gains on Friday, dragged down by auto makers and mining companies.

Automakers were among the worst performing sectors after the investigation of emission tests extended to Daimler, Peugeot, and Renault.

Daimler, which also reported disappointing quarterly results, tumbled 6.8%. The company said the Department of Justice prompted it to review its emission certification process in the U.S.

In France, Peugeot erased 2.6% and rival Renault fell 1%.

Volkswagen lost 3.2% after the costs related to the emissions tests fraud were significantly higher than anticipated. The company agreed to buy back or repair 500,000 diesel cars in the U.S and to provide compensation for damage to the environment and the customers.

Resource sector shares also declined due to the recent volatility in metal prices. Shares of Anglo American dived 3.4%, Rio Tinto lost 2.6%, Glencore dropped 2.9%, and Antofagasta shed 2.5%.

In Finland, Sampo plummeted 5.8% after the shares of the financial holding group went ex-dividend.

In London, the FTSE 100 index lost 78.26, or 1.23%, to 6,303.18, while in Frankfurt, the DAX index fell 80.32, or 0.77%, to 10,355.41.

In Paris, the CAC 40 index dropped 18.05, or 0.39%, to 4,564.78.

While the FTSE 100 index erased weekly gains, the DAX and the CAC 40 indexes are headed towards closing the week 3% to 4% higher.

Daimler AG dropped 5.7% to €62.9 on disappointing results and the news that the U.S. Justice Department required the emissions certification process to be reviewed.

Revenue increased 2.4% to €35.05 billion in the first-quarter, but net profit fell 32% to €1.40 billion from the same period a year earlier.

EBIT from ongoing operations fell 8.5% to €2.68 billion compared to the first-quarter of 2015.

The German auto maker confirmed its forecast for slight revenue growth and improved operating profit from continuing operations in 2016.

Kering SA plunged 5.2% to €151.85 after the French luxury group posted lackluster quarterly results, which reflect a drop in tourism, particularly in Western Europe, North America, and Japan.

Sales of luxury items in the first-quarter rose 2.6% to €1.8 billion from a year earlier, far below the expected 5% organic growth.

Sales of the Gucci brand were up 3.1% to €894.2 million during the period, lower than the expected increase of 4.7%.

The worst performing brand was Bottega Veneta, with the sales decline of 8.3% from the same period a year ago.

Standard Chartered Plc lost 0.6% to 553.1 pence after the Southeast Asian bank, DBS Group Holdings, said it wasn’t interested in acquiring the U.K. lender.

“StanChart is four times our size. For a bank like us to try and tackle even pieces of StanChart would just completely consume us. That’s all we would do for the next three years,” said DBS CEO Piyush Gupta.

Zodiac Aerospace soared 10.5% to €21.08 on rumors that Safran was interested in bidding for the aerospace supplier.

Safran declined to comment, while Zodiac said the group was not for sale.

Yesterday Safran agreed to sell its explosives-detection arm to Smiths Group for $710 million to focus more on its core aerospace and defense markets.