Volkswagen drives down German stock market

LONDON (AFP) - A plunge of nearly 10 per cent in Volkswagen shares as the pollution scandal dogging the carmaker expanded to petrol engines pulled down Frankfurt's stock market on Wednesday despite the prospect of additional monetary stimulus.

VW shares fell 9.5 per cent to 100.45 euros after the German car giant revealed Tuesday that an internal probe had found that as many as 800,000 vehicles were emitting more of the greenhouse gas CO2 than it had reported to authorities.

German officials said nearly 100,000 vehicles with petrol engines were affected by the latest revelations, adding a fresh dimension to VW's woes following an earlier admission that 11 million of its diesel vehicles were fitted with pollution cheating devices.

VW drove down the DAX which ended the day off 0.97 per cent at 10,845.24 points.

By contrast, in Paris the CAC 40 won 0.25 per cent to close at 4,948.29.

"Markets have been enthused by another big hint of further monetary stimulus from ECB president Mario Draghi while at the same time seeing better than expected service sector and manufacturing data this week," said Jasper Lawler, an analyst at CMC Markets trading group.

The Euro Stoxx 50, the euro zone's benchmark index, hit 3,472 points - the highest level since Aug 19 - before pulling back.

The prospect of more stimulus didn't help the euro, however, which slid to US$1.0860 from US$1.0959 late on Tuesday in New York.

Meanwhile, the dollar was helped by comments from US Federal Reserve chairman Janet Yellen on Wednesday that US economic activity remains solid and that the Fed could decide to increase interest rates at its December meeting.

In London, gains in mining and supermarket shares helped push up the benchmark FTSE 100 index 0.46 per cent to 6,412.88 points.

Shares in Marks and Spencer rallied 2.79 per cent to 535 pence as investors cheered news of rising underlying pretax profits and the latest dividend payout.

However, the clothing-to-food retailer posted sliding first-half net profit on tumbling clothes sales and a poor international performance.

M&S, regarded as a barometer of British consumer demand, said performance was dogged by the company's decision to avoid discounting, while rainy weather also dampened demand as shoppers avoided the British high street.

In Asia, Tokyo's benchmark Nikkei 225 index closed up 1.3 per cent on Wednesday as Japan Post shares skyrocketed in their long-awaited market debut.

Shares in the vast company - along with its banking and insurance units - were listed on the Tokyo Stock Exchange following an US$11.5 billion share sale, in the largest offering globally since Chinese e-commerce giant Alibaba's record US$25 billion initial public offering last year.

Meanwhile, Shanghai stocks surged more than four percent on details of China's next five-year plan, which includes calls for liberalisation in capital markets and in the foreign exchange regime.

US stocks had opened higher, continuing to benefit from upward momentum following a jump in the Chinese stock market, but turned down after Yellen's comments and a report showing only modest US private-sector job growth in October.

The Dow Jones Industrial Average stood down 0.10 per cent at 17,899.91 points in midday trading.

The broad-based S&P 500 shed 0.40 per cent to 2,101, while the tech-rich Nasdaq Composite Index gave up 0.25 per cent to 5,132.30.

The ADP national employment report said the private sector increased hires by 182,000 in October, down 8,000 from September and roughly at the average for the past four months.