Europe Markets

Europe ekes out gains as VW CEO steps down

Europe ends slightly higher as VW CEO steps down

European stocks finished marginally higher on Wednesday, as investors digested the latest from Volkswagen and continued to ponder China's economic health.

The pan-European STOXX 600 ended trade around 0.1 percent higher, having pared earlier gains.

London's FTSE 100 outperformed other indexes on Wednesday, finishing up 1.6 percent. The French CAC index, for instance, finished around 0.1 percent higher.

Germany's DAX pared gains at the close, ending up 0.4 percent after Deutsche Bank also cut its target levels for the index and the CEO of Volkswagen stepped down.

U.S. stocks traded in a narrow range Wednesday, with investors eyeing oil prices and China's weak manufacturing data.

Martin Winterkorn, the chief executive of Volkswagen, succumbed to increasing pressure on Wednesday by resigning just ahead of the European market close. The world's second-largest carmaker is engulfed in an emissions scandal that has wiped nearly 26 billion euros ($29 billion) off its market value this week.

Shares in the German stalwart close up around 5 percent, down from highs of up to 8 percent prior to Winterkorn's announcement, fueled by bargain hunters. This came after shares tanked around 18 percent on Monday and nearly 20 percent on Tuesday.

"The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis," Winterkorn said on Wednesday.

The board has yet to announce a successor to 68-year-old Winterkorn. However, rumors earlier suggested he might be replaced by Porsche CEO and President Matthias Muller, although Volkswagen has denied this.

As a result of the crisis, VW stock on Wednesday received a series of downgrades from the likes of Deutsche Bank and JPMorgan.

"We now rate VW Neutral (OW) with a new December 2016 target price of €179 (from €253), as we lack clarity on the potential total cost of the recall and the risk of additional engine investigations," JPMorgan wrote in a note on Wednesday.

Meanwhile, Societe Generale downgraded the European automobile sector to "neutral" from "overweight." Nonetheless, most auto stocks finished trade in the green, with the exception of France's Peugeot Citroen and Renault, which both closed down over 2 percent.

Other stocks to watch

Basic resources stocks pared some of Tuesday's losses, with London-listed Glencore and Anglo American both finishing in positive territory. A number of brokers raised their outlook on Glencore's stock, with Bernstein calling the recent price fall "overdone".

Around the close, oil prices slipped after initially extending gains, as government data showed a second consecutive weekly fall in U.S. crude oil inventories. Brent crude last stood at around $48.30 a barrel, while U.S. light crude was around $45 per barrel.

Shares in healthcare firm Coloplast fell 4.7 percent after it took a further $448 million charge as part of a U.S. lawsuit.

Euro zone economy in focus

On the macroeconomic front, flash data showed that manufacturing and services output for the euro zone came in below expectations in September. The composite purchasing manager's index (PMI) from Markit came in at 53.9, down from 54.3 in August and below expectations for a reading of 54.1 from analysts polled by Reuters.

In Asia, equities slid deeper into the red on Wednesday, after a preliminary reading of activity in China's mammoth manufacturing sector fell to a six-and-a-half-year low of 47.0 in September, adding to worries over the world's second-largest economy.

The downbeat sentiment persisted even as Chinese President Xi Jinping defended his country's growth pace and reassured the world that China's financial markets would remain stable, in his first policy address during a state visit to the U.S.

A worker packs pairs of shoes in boxes at the factory of the Italian shoes and luxury leather goods Tod's headquarters.
Euro zone business activity contracts in September
Group of workers at a small parts manufacturing factory in China.
Flash China Caixin PMI falls to 47 in September, a 6-1/2-year low