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European equity markets gained ground on Monday, buoyed by stronger bank and chemical stocks, although a slump in carmaker Volkswagen hit the German market.
Volkswagen’s shares slid 15 per cent after Volkswagen told US dealers to halt the sales of some 2015 diesel cars after regulators found software it designed for the affected vehicles gave false emissions data.
Volkswagen has launched an investigation into the matter and could face penalties of up to $18 billion, the US Environmental Protection Agency (EPA) said.
The drop in Volkswagen hit other carmaker stocks, with BMW and Daimler down around 4 per cent, while Germany’s DAX fell 0.7 per cent.
“The commencement of legal proceedings against VW by the US EPA is profoundly serious,’’ analysts at Bernstein wrote in a note.
The DAX underperformed gains elsewhere in Europe, with the pan-European FTSEurofirst 300 index and the euro zone’s blue-chip Euro STOXX 50 index both advancing 0.3 per cent.
The broader European equity markets were steadied by firmer banking and chemical shares.
Spanish bank Santander rose 1 per cent after Citigroup upgraded the stock to “buy’’ from “neutral’’.
Chemicals company Bayer progressed 1.2 per cent after Bayer’s plastics division Covestro said it aimed to raise about €2.5 billion ($2.84 billion) in an initial public offering (IPO).
Some investors remained concerned by an economic slowdown in China, but others said such worries had been overdone.
“We believe sentiment is too bearish regarding near-term Chinese growth momentum. Infrastructure orders are likely to pick up to meet budget shortfalls that were made during the first half. We note Chinese house prices are now up for four months in a row,’’ said JP Morgan equity strategist Mislav Matejka.
Greece’s stock market edged down 1 per cent after the leftist Syriza party’s election victory, with yields on government paper edged lower. Investors’ focus turned from the election to the formation of the new cabinet and the implementation of the country’s third bailout.
Athens’ main ATG equity index is down nearly 20 per cent since the start of 2015, underperforming a 3 per cent gain on the FTSEurofirst.
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