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Deutsche Bank cuts DAX year-end forecasts on Volkswagen concerns

Michele Maatouk

LONDON (ShareCast) - (ShareCast News) - Deutsche Bank (Other OTC: DBAGF - news) has downgraded its targets for the German DAX to adjust for news flow around car maker Volkswagen (Other OTC: VLKAF - news) . The bank pointed out that news about VW's legal case on emissions in the US has erased DAX Autos' market cap by 15% in just two days, which it said was a "huge headwind" to its current view on the DAX, given the sector's 35% earnings per share and 25% market cap contribution to the German blue chips index.

"Given VW's former 13% DAX EPS contribution, our previous year-end 2015/16 EPS targets get cut by 4% each," it said.

Deutsche downgraded its year-end 2015 target to 10,300 from 11,300 and its year-end 2016 target to 11,200 from 12,100. Still, these targets are both above the current level, as the index closed at 9,571 on Tuesday.

"Audi (Other OTC: AUDVF - news) 's case from 1987 - sudden-acceleration incidents - reveals that recovering from a lawsuit in the US can take up to 10+ years before selling volumes reach previous peaks again.

"Back in the days Audi suffered a massive loss in reputation and this wasn't even about cheating...," said the bank.