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Europe: Stocks weather Standard Chartered, Volkswagen storm


[LONDON] Disappointing results from Britain's emerging markets bank Standard Chartered and the mushrooming scandal at Germany's troubled automaker Volkswagen dominated trading in Europe on Tuesday.

StanChart said it sank into the red in the third quarter with an unexpected pre-tax third-quarter loss of US$139 million, and outlined surprise plans to raise US$5.1 billion in fresh capital to bolster its finances.

Volkswagen meanwhile faced new accusations in the ever-widening emissions cheating scandal, but the German auto giant adamantly denied the new charges.

"Sentiment (was) dominated by the return of the Volkswagen story and the surprise bringing forward of a rights issue by Standard Chartered Bank after the bank slumped to a surprise Q3 loss," said analyst Michael Hewson at traders CMC Markets.

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By late afternoon European markets had recovered, with London's FTSE gaining 0.34 per cent to 6,383.61 points.

In the eurozone, Paris's CAC 40 index closed with a gain of 0.41 per cent at 4,936.18 points, while Frankfurt's DAX 30 ended the day flat at 10,951.15 points.

StanChart shares slumped 6.67 per cent to finish the day at 666.00 pence in London, after the bank also announced plans to axe 15,000 jobs worldwide.

The job losses are part of a major restructuring that will cost around US$3.0 billion, the bank said.

"With Standard Chartered announcing a monster rights issue and slashing jobs, investors are heading for the exits in droves," said Mike McCudden, head of derivatives at stockbroker Interactive Investor.

Across in Frankfurt, Volkswagen shifted into reverse after US regulators accused it late Monday of fitting illegal "defeat devices" into its larger 3.0 litre diesel engines.

The German auto giant, which adamantly denied the new charges, saw its share price initially nosedive 5 per cent, but pared the loss to close down 1.51 per cent at 111 euros.

In an affair that has rocked the automobile sector around the world since it broke in September, the carmaker has already admitted using the software, which skews the results of pollution tests, in smaller 2.0 litre diesels equipped in some 11 million cars worldwide.

But the US Environmental Protection Agency said late Monday it had discovered in its investigation that various six-cylinder 3.0 litre diesel VW Touareg, Porsche Cayenne and Audis had also been rigged with the software.

Meanwhile, Europe's banking sector remained under pressure from the Standard Chartered news.

British peer Barclays fell 1.08 per cent to 233.50 pence and Lloyds Banking Group dropped 0.71 per cent to 74.47 pence.

In Paris, French pair BNP Paribas and Societe Generale saw their shares drop 0.07 per cent and 0.50 per cent, to stand at 55.31 euros and 42.51 euros respectively.

The "A" shares in Shell shot up 2.96 per cent to 1,056.50 pence after the oil company said it had identified another US$1.0 billion in savings from its BG Group takeover and unveiled a new overhaul to combat a "prolonged downturn" in oil prices.

Asian stocks mostly rose on Tuesday on the coattails of global gains the previous day, although concerns about China's slowing growth still lingered.

Sydney closed up 1.42 per cent, boosted by a central bank decision to keep the cash rate at 2 per cent, while Seoul advanced 0.65 per cent and Hong Kong ended 0.89 per cent higher.

Shanghai had slipped 0.25 per cent at the close.

US stocks pushed higher Tuesday, with the Dow Jones Industrial Average climbing 0.49 per cent to 17,916.01 points in midday trading.

The broad-based S&P 500 added 0.09 per cent to 2,105.89, while the tech-rich Nasdaq Composite Index rose 0.15 per cent to 5,134.96.

King Digital Entertainment, the creator of the "Candy Crush" video game franchise, jumped 14.6 per cent on news it agreed to be acquired by Activision Blizzard for US$5.9 billion. Activision gained 3.8 per cent.

Shares in AIG fell 4.3 per cent after its chief executive said activist investor Carl Icahn's idea to split up insurance giant into three companies "did not make financial sense." In foreign exchange activity, the European single currency slid to US$1.0947 from US$1.1014 late in New York on Monday.