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Stock markets skid as car emissions saga widens

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[LONDON] Stock markets were subdued on Friday after a torrid week for automakers with Germany's Daimler probing its vehicle emissions, Volkswagen announcing its first loss in 20 years and Mitsubishi suffering a rout.

Daimler limited an initial 6.6 per cent decline to 5.1 per cent by the close in Frankfurt after the owner of Mercedes-Benz announced on Thursday it was launching an internal investigation "into its certification process related to exhaust emissions in the United States" following a US Justice Department request.

The announcement came as Volkswagen said it had reached agreement with regulators to offer "substantial compensation" to US owners of some 480,000 illegally-polluting diesel cars.

The still-incalculable fallout from the scandal deepened as Volkswagen announced its first year-end loss since 1993 as it sets aside 16.2 billion euros (S$24.6 billion) in provisions to cover potential fines, lawsuits and recall costs.

VW announced a bottom-line loss of 1.582 billion euros in 2015 following profits of 10.84 billion euros a year earlier.

Shares in the auto giant slid 1.3 per cent at the close.

Mitsubishi Motors suffered another rout, capping a disastrous week that has seen its shares plunge more than 40 per cent after the automaker's shock admission that it cheated on fuel-efficiency tests.

In the eurozone, Frankfurt's DAX 30 closed off 0.6 per cent at 10,373.49 points while the Paris CAC 40 shed 0.3 per cent to 4,569.66.

London's benchmark FTSE 100 index closed down 1.1 per cent at 6,310.44 points compared with Thursday's close.

Renaud Murail of Barclays Bourse in Paris saw the local market at least holding a stable line in choppy times.

"It's notable that (the market) is managing to stay close to the 4,600 point mark and not sliding back too much - compared with the start of the year. Market psychology has changed favourably," Mr Murail indicated.

On Wall Street, the tech-dominated Nasdaq index tumbled shortly after the open as shares in Microsoft and Google parent Alphabet sank on disappointing earnings. Midway through the session, the Dow was off 0.10 per cent.

Alphabet lost 4.7 per cent after reporting earnings per share that lagged analyst expectations by 46 cents, while Microsoft tumbled 8.0 per cent as it reported a 25 per cent plunge in quarterly profits to US$3.8 billion.

The euro was down against the dollar following the European Central Bank's policy meeting on Thursday, which saw the ECB pledge more stimulus help if needed to help boost economic growth and tackle weak inflation.

"The global markets look decidedly haggard this Friday, perhaps a tad overtired from their start-of-the-week surge," noted Connor Campbell, analyst at Spreadex traders.

Given the pollution turbulence, focus was firmly on the auto sector. Daimler's heavy share-price slide hit also its rivals, but Volkswagen shares limited an early 3.0 per cent fall to 1.0 per cent while BMW closed off 1.6 per cent.

The German emissions probe found 16 major car brands - ranging from France's Renault to Italy's Fiat and Japan's Nissan - showed irregularities.

"Just as the VW fallout was beginning to come under some sort of control, Mitsubishi's admission has reignited fears of a more widespread problem," said Richard J Hunter, head of research at Wilson King Investment Management.

"Whilst there is no suggestion of any wrongdoing, the names of Daimler and Peugeot have also been dragged under the spotlight, with the obvious concern to investors that there may be more problems to come," he told AFP.

French auto giant PSA Group, the maker of Peugeot and Citroen cars, said Thursday its premises had been raided by France's anti-fraud squad as part of a probe into emissions.

Asian stock markets meanwhile mostly retreated on profit-taking Friday, tracing losses in New York, but crude prices rallied on fresh hopes for a deal to limit output.

Tokyo's Nikkei saw a late-afternoon burst to end sharply higher for a fourth straight session as the yen plunged on a report the Bank of Japan is considering help for financial groups hit by its negative-rate policy.

Optimism over the Chinese economy and soothing comments from the US that interest rates will not go up before June helped push world markets to multi-month highs ahead of Friday's profit-taking.

AFP