Spreadex Market Update
Increasing scale of Volkswagen scandal exacerbates bearish sentiment
The FTSE plunged below 6000 for the first time in 3 weeks, dragged down by a widespread decline across its oil and mining stocks. Notable losses for Brent Crude and copper led to a sharp drop for BP, Shell and Rio Tinto, whilst KAZ Minerals fell by a whopping 17% after BNP Paribas downgraded the stock to ‘underperform’. Added to the FTSE’s woes was a big miss in public sector net borrowing, widening to £11.3 billion from the expected £8.7 billion, leaving the UK index to deal with a morning drop of nearly 150 points.
Things were even worse in the Eurozone; the weight of the Volkswagen scandal didn’t lessen as the day went on, causing the DAX and CAC to each fall by around 3%. The German car company lopped ANOTHER 18% off its price following yesterday’s 20% tumble, with VW announcing that it will set aside €6.5 billion to deal with the growing calls for a worldwide investigation into an issue that could affect 11 million vehicles, adding in a profit warning for good measure. 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.
It looks like, as it is often wont to do, the US open will only exacerbate the morning’s losses, bringing with it little in the way of data to try and force a change in trading this afternoon. Currently the futures are pointing to a 200 point drop for the Dow Jones, a drop that would take the index to a 2 week low in the process.
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