Spreadex Market Update
6 year low for Chinese manufacturing PMI joins VW scandal to add to bearish sentiment
A 6 year low for the Caixin manufacturing PMI took its toll on the Shanghai Composite, with the index falling over 2% by the session’s close as investors received yet another reminder that, whilst certain car-related matters may be hogging the headlines, the big beast in the East is still a lurking danger zone for the markets.
The Eurozone has its own manufacturing (and services) data to deal with this morning; the French figures have already beaten expectations, with a slightly more mixed picture for the rest of the region (luckily for Germany the latest manufacturing reading would have come before certain auto issues began). However, those figures have the unenviable task of trying to distract from the now-omnipresent Volkswagen debacle. A wave of (understandable) downgrades for VW sent the company’s preference shares down another 8%, taking the stock below the €100 mark, only to quickly lift away from those lows (for now at least).
Investors, if they were looking for any more reasons to sell, appear to have been spooked by Deutsche Bank’s warning that the scale of the scandal can’t yet accurately be assessed; in other words, the €6.5 billion VW has set aside could prove to be painfully insufficient. Once again it was the auto sector as a whole that suffered, dragging with it the DAX and the rest of the Eurozone; it will be interesting to see if Mario Draghi has anything to say about the impact of the issue on the region’s economy when he holds his latest ECB press conference this afternoon.
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