Germany lags European share rally as Volkswagen scandal widens

LONDON: European shares rose on Wednesday, although Germany's blue-chip index sharply underperformed after a scandal at carmaker Volkswagen widened.

Volkswagen fell 8.2 per cent after it said it had understated the fuel consumption of 800,000 cars sold in Europe. Majority stakeholder Porsche was also down 8.2 per cent after it warned that VW's latest findings could weigh further on its results.



The STOXX 600 Autos and Parts index was the only European sector in negative territory, with the likes of BMW , Daimler and Peugeot down 2-3 per cent.

"Another week, another shock in the VW story. As CO2 becomes the new focus, we cut our estimates and TP to reflect the latest admission," analysts at Exane BNP Paribas said in a note. "VW's latest admission on CO2 will have ramifications across the sector."

Germany's DAX index was up just 0.2 per cent, underperforming a 1 per cent rise for the FTSEurofirst 300.



Germany also underperformed on the data front as well. PMI readings in France came in ahead of the initial "flash" numbers, while the German figures came in below expectations.

"There's a bit of wariness coming through over Germany now. If you've based your thesis on the idea that Germany will outperform, suddenly the data doesn't seem to be backing that up," Chris Beauchamp, market analyst at IG said.

Top riser was commodities firm Glencore, up 6.3 per cent after saying trading was strong. It said it was on track to reduce its debt and boost liquidity thanks to asset sales, and plans to deepen copper output cuts to help lift prices.



Basic resources stocks were up 2.4 per cent, the top sectoral riser. Traders said that comments from China's President Xi Jinping that were seen as supportive to the economy, as well as a firmer copper price, were also helping the sector.

British retailer Marks & Spencer gained 3.5 per cent as it raised its annual forecast for margins in clothing and homeware even though quarterly sales fell in this troubled division.

With 55 per cent of STOXX Europe 600 companies having reported earnings so far this quarter, 49 per cent percent have beaten or met expectations, with 51 per cent missing forecasts.