Europe close: Stocks tumble as BMW speculation puts brakes on DAX

LONDON (ShareCast) - (ShareCast News) - European equity markets tumbled on Thursday, as car-makers stocks continue to decline amid speculations of breaching pollution limits. The benchmark Stoxx Europe 600 index closed down 2.12%, while France's CAC 40 and Germany's Dax lost 1.93% and 1.92% respectively.

The euro was broadly flat against the yen, but rose 0.77% against the dollar and gained 0.69% against the pound.

Mixed data in Germany On the economic data front, the Ifo business climate index rose to a seasonally-adjusted 108.5 from 108.3 in August, ahead of expectations for a reading of 108.

The business expectations index increased to 102.3 from 102.2 and better than estimates of 101.5. The current assessment index, however, fell to 114 in September from 114.8 in August, missing expectations for a reading of 114.7.

"The German IFO business survey reported an improvement in economic sentiment in September, but this survey was done before the VW scandal broke and it is quite likely given the repercussions this event is likely to have on German supply chains that if the survey were done now the result would likely be very different," said Michael Hewson from CMC Markets. However, according to the forward-looking GfK (Swiss: GFK.SW - news) survey, the German consumer sentiment index declined from 9.9 in September to 9.6 in October, slightly below analysts' expectations for a 9.8 reading.

Across the Atlantic, homes sold at the fastest rate in seven years in August, while US durable goods declined less than expected last month.

Orders for long-lasting goods declined 2% in August compared with the 2.3% drop analysts had forecast and with the 1.9% increase registered in the previous month.

Meanwhile, according to the Department of Labor, new unemployment benefits claims rose by 3,000 to 267,000 in the week to 19 September, compared with analysts' expectations for a 272,000 reading.

Investors will now focus on Janet Yellen's speech, with the Fed Chairwoman set to speak at 2200 BST in her first public appearance since the US central bank opted to keep interest rates unchanged last week.

Car (HKSE: 0699-OL.HK - news) stocks slow down In company news, BMW (Swiss: BMW.SW - news) tumbled 5.60% following a report in German newspaper Auto Bild that one of its diesel vehicles exceeded EU pollution limits by 11 times. "The scrutiny that the automotive sector is under is having a particularly detrimental effect on the DAX, as 10% of the equities in the index come from this sector and even more disturbing is the fact that its index weighting is even higher," said Alastair McCaig, senior market analyst at IG (LSE: IGG.L - news) .

"The ripple effect from this will reach the four corners of Germany, as it is estimated that as many as one in six work in the automotive industry or an ancillary business." Volkswagen (Other OTC: VLKAF - news) slid 0.38% after the company's chief executive Michael Winterkorn announced his resignation on Wednesday on the back of the emissions scandal. A successor is expected to be chosen at a meeting on Friday.

Monte dei Paschi (Milan: BMPS.MI - news) di Siena was firmly on the front foot after it settled with Nomura over a derivative trade called "Alexandria" that hit the bank's profits.

Elsewhere, Hennes & Mauritz slipped 3.99% after the Swedish clothing retailer said its third-quarter profit was hit by dollar strength.