Article / 25 September 2015 at 7:02 GMT

Morning Markets: VW contagion engulfs rivals

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

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Watchlist

  • French consumer confidence survey (0645 GMT; already published)
  • EU monetary developments in Eurozone (0800 GMT)
  • US GDP 3rd estimate (1230 GMT)
  • US Univ of Michigan consumers  (1400 GMT)

The dollar has taken its cue from comments from US Federal Reserve chair Janet Yellen late Thursday to pull EURUSD back towards 1.1150 during the Asia session. Yellen in her usual opaque way indicated that an interest-rate hike was still on the agenda before year-end and it's probably fair to take that literally. That means December more likely than October.

Asian market gains were wiped out overnight with the exception of the Nikkei. The Nikkei shrugged off that disappointing Japanese CPI which saw a fall of 0.1% and laid bare Prime minister Shinzo Abe's three-arrows strategy to be up 1.76% on day ín this shortened holiday week.

The Shanghai Composite Index was also once again threatening to dip below 3,000 down 1.64% at 0623 GMT.

The Volkswagen scandal may have shown signs of easing in the last day or two but the fraud probe is now engulfing two other German automobile makers, BMW and Daimler. BMW shares fell almost 10% at one point Thursday when news broke its emissions from one car model were far higher than EU limits and Daimler was branded as having the worst record for overstating its fuel economy figures.

With the German government now involved via the Transport Ministry, there is no respite. VW chief executive Martin Winterkorn is probably not feeling "endlessly sorry" anymore after pocketing a reported €60 million, but the latest wing of the VW Group to feel the heat is its financial services business.

Investors have taken fright (and flight) after Volkswagen lost a third of its value this week and with rating agencies hovering and fears that Volkswagen Financial Services will face funding problems, the reputational damage done to the brand still has a long way to play out before we get to the bottom of this one.

Volkswagen's share price was at 118.450 at 0636 GMT. This time last week it was north of 160.00.

Market signals

Asian session

  • Japan’s core CPI figure has fallen into negative territory for the first time since April 2013
  • It fell by 0.1% in August compared to levels of a year earlier
  • AUD went on a wild ride overnight moving from US69.42c to US70.41c
  • The currency settled at just over US70c at 2330 GMT
  • ASX 200 charges higher at open, up 0.8% to 5112 at 2350 GMT
  • By 0545 GMT, the ASX was trading lower at around 5,060
  • At 0522 GMT Hong Kong was down 0.1%, and the Shanghai Composite fell 1.8%
  • The Nikkei was up 1% and SIngapore had fallen 0.5%


In opinion

1..2..3
The Fed's James Bullard will probably send a message in his speech that is bullish on the USD, says Juhani Huopainen. But the reaction could be limited.

Off target
Max McKegg says Yellen's speech acknowledged inflation remains below target due to transitory factors and while the economy is not yet back to full employment, it is getting close.

Smart timing
Alibaba has launched a smart watch aimed at the in-store payments business and as Neil Flynn explains, it  is designed to stave off competition from the launch of Apple Pay in China.

Tightening talk
Fed chair Janet Yellen's comments supported a gradual pace of tightening, writes Saxo's Singapore trading team, and highlighted there is still some risk of a ‘liftoff’ this year. 

Real catastrophe
Brazil is on the edge of a catastrophe after the real fell to a new record low against the dollar. Contagion in Latin America is possible but there could be opportunities, says Simon Fasdal.

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 We all love a Brazilian party but there is a very real crisis developing. Photo: iStock

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