European stocks sink on China downgrade, VW scandal

London: European stock markets tumbled Tuesday with carmakers and miners in freefall on the worsening Volkswagen scandal and a bleak outlook for China`s economy, dealers said.

Frankfurt`s benchmark DAX 30 index sank 3.17 percent to 9,632.78 points in afternoon trading, with carmaker Volkswagen collapsing by a fifth after revealing as many as 11 million diesel cars had been equipped with devices that could skew emissions data.

The Paris CAC 40 shed 3.02 percent to 4,446.95 points compared with Monday`s close. 

London`s FTSE 100 fell 2.40 percent to 5,962.15 points, with miners suffering sharp falls after the Asian Development Bank (ADB) slashed its growth forecasts for China.

"If a downgrade from the ADB weren`t bad enough for global stock markets, knocking the mining sector sharply lower on prolonged global growth fears, the auto sector has hit full reverse as Volkswagen`s woes continue," Michael Hewson, analyst at traders CMC Markets analyst, told AFP.

VW issued a profits warning "amid wider concerns that its problems might point to wider malpractice in the rest of the industry", said Hewson. 

Reports said VW chief executive Martin Winterkorn could be forced out later this week by the company`s supervisory board and the United States has opened a criminal probe.

In afternoon deals, VW shares plunged 19.06 percent to 107.00 euros as the group also set aside 6.5 billion euros ($7.3 billion) in provisions in the third quarter to cover potential costs arising from the scandal.

The troubled company -- whose stock had plunged 17 percent Monday -- warned it would have to adjust its annual profit targets accordingly. 

VW shares have now lost around 58 percent from the 255 euros it struck in March. 

The enormity of Volkswagen`s problems became more clear as it acknowledged 11 million vehicles may have the pollution cheating device, much more than the half million for which US authorities could fine the carmaker $18 billion.

The fast-moving scandal sent rival European carmakers plunging on growing worries over the sector.

German carmakers BMW and Daimler sank by 4.99 percent and 6.22 percent to stand at 79.82 euros and 66.64 euros, respectively.

In Paris, French peers Peugeot and Renault shed 7.94 percent and 7.710 percent to stand at 13.98 euros and 66.13 euros. 

Shares in Fiat Chrysler fell 5.82 percent to 11.98 euros on the Milan index, which was down 3.23 percent overall.

"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," said Connor Campbell, analyst at dealers Spreadex.
Mining companies were also among the heaviest fallers after the ADB forecast Asian growth would hit 5.8 percent this year and 6.0 percent in 2016. March`s forecast was for 6.3 percent for both years.

It tipped China -- the main driver of global economic growth -- to expand by 6.8 percent this year. That was downgraded from 7.2 percent after a stream of weak indicators including on trade, inflation, investment and consumer spending.

The news weighed heavily on mining and metal groups around Europe because China is a major consumer of commodities such as copper and gold.

In London, mining giant Glencore saw its share price nosedive 13.78 percent to 102.60 pence, topping the FTSE 100 fallers` board.

Anglo American dropped 8.30 percent to 637.20 pence and Antofagasta shed 7.34 percent to 524 pence.

In Amsterdam, shares in ArcelorMittal -- the world`s biggest steelmaker -- lost a hefty 6.65 percent to 5.42 euros. 

Steel group Thyssenkrupp shed 4.18 percent to 16.48 euros in Frankfurt trades.

In foreign exchange activity on Tuesday, the European single currency slid to $1.1152 from $1.1195 late in New York on Monday, as the dollar received support by US officials talking up chances of an interest rate hike later this year.

That talk hit emerging market currencies in Asia, but the region`s stocks fared better. 

Sydney ended 0.74 percent higher and Seoul closed up 0.88 percent. Hong Kong added 0.18 percent and Shanghai finished up 0.92 percent.

US stocks tumbled in opening trade Tuesday, with the Dow Jones Industrial Average sliding 1.32 percent in the first five minutes of trading to 16,291.64 points.

The broad-based S&P 500 fell 1.31 percent to 1,941.26, while the tech-rich Nasdaq Composite Index dropped 1.41 percent to 4,760.90