Right, so German equities just had their worst day of the year.
As noted earlier, a rout in automakers tied to reports of possible collusion didn’t help matters. Here’s Bloomberg’s quick summary:
Another week, another scare from the German car industry.
What began with Daimler AG’s massive recall of more than 3 million diesel cars to lower their emissions, ended on Friday with Audi also embarking on a voluntary recall of 850,000 vehicles. Adding to the spate of bad news was a report in Der Spiegel magazine that the biggest car manufacturers — Daimler, BMW AG and Volkswagen AG as well as VW’s Audi and Porsche brands — may have colluded for decades on technology. The companies declined to comment.
Shares of BMW, VW and Daimler tumbled on the report, which cited a document submitted by Volkswagen in July 2016 and referenced another from Daimler.
Yes, all kinds of “collusion” that may have been going on for a long time – ring any bells America?
And then there’s the stronger euro to worry about…
Oh, and Erdogan is furious with Berlin:
Germany Trying to Scare Turkey, Doesn’t Get Free Market: Erdogan
— Heisenberg Report (@heisenbergrpt) July 21, 2017
Diplomatic relations between Turkey and Germany have taken a dramatic turn for the worst of late after Turkey arrested German human rights consultant Peter Steudtner and five other people including Amnesty International’s country director, Idil Eser, on suspicion of aiding terrorists.
That irritated Angela Merkel, whose spokesman Steffen Seibert suggested the development marked a “serious and sad” turn in German–Turkish relations.
That was 2 days ago and it only got worse (and more absurd) from there.
Next, Ankara sent Germany a list with “dozens” of companies (including Daimler AG, BASF SE and a fast food doener kebab stall), that Erdogan swears are supporting terrorism and have ties to his arch nemesis Fethullah Gülen. I challenge you not to laugh at that.
Yesterday, German Foreign Minister Sigmar Gabriel told reporters in Berlin that “one can’t advise anyone to invest in a country (Turkey) when there is no legal certainty, and where companies, completely respectable companies, are presented as terrorists.”
That prompted German exporters’ lobby group BGA to warn about a looming threat from a slump in exports to Turkey.
Finally, Erdogan chimed in with this series of accusations on Friday:
- Says he called Turkish intelligence chief and interior minister to ask whether there were any probes into German companies and was told, “it’s all lies.” Demands proof of claims there’s any “black list” of German companies
- Says German authorities are insistent on mixing commerce and politics, showing they don’t understand the free market
- Says German govt is sheltering terrorists who’ve fled Turkey, including by providing protection for PKK marches in German streets
- Condemns German requests for release of Germans on trial in Turkey, saying it’s up to courts to decide and “our judiciary is more independent” than Germany’s
- Says German politicians’ aim is “obviously to scare German companies away from Turkey”
- Says “German companies have a special place in Turkey” and Turkey won’t be scared off by threats
So when you combine that batshit crazy scenario with the new report on automaker collusion and a surging euro, what do you get? Well, you get the above-mentioned worst day for German equities this year.
And you also get a soaring DAX VIX which spiked nearly 13% on Friday…
Here’s a YTD on that for some context:
More broadly, European stocks fell to their lowest level in 10 days.
As Bloomberg notes, “concern about potential antitrust collusion sent carmakers toward the worst decline in more than a year,” with none out of the Stoxx 600’s 19 sectors rising.