Pay Attention! DAX Under Pressure Again As Automakers Plunge, Euro Weighs

Well, the fallout from Friday’s blockbuster automaker collusion report continues for Daimler AG, Volkswagen, and BMW.

You’ll recall that the bottom fell out on Friday after Spiegel magazine reported on potential antitrust collusion citing a 2016 Volkswagen document and referencing another from Daimler. That just added to existing jitters surrounding recalls of diesel vehicles.

That story is spilling over into Monday as the Stoxx Europe 600 Index extended its decline and the carmaker gauge fell.

Autos

SX5e

Importantly, the DAX had its worst day of the year on Friday and it wasn’t just the automakers’ fault. Markets are also concerned about a worsening diplomatic spat with Turkey (you can read the full story on that here).

On Monday, the DAX fell further and the DAX VIX rose again. Here’s a fun chart intentionally scaled to look as scary as absolutely possible:

DAX

And don’t forget, lurking in the background for European shares is a euro that’s floating around its August 2015 highs…

EURUSD

…amid spec positioning that’s the most bullish in six years…

Euro

Finally, here’s a quick rundown of analyst opinions on the automaker story via Bloomberg:

Autos are the worst-performing sector on the Stoxx Europe 600 after EU and German regulators said they are studying possible collusion among German automakers. Der Spiegel magazine reported on Friday that BMW, Daimler and Volkswagen may have cooperated for decades on technology.

  • VW -3.6%, Daimler -3.2%, Peugeot -2.3%, BMW -2.7%. Ferrari +0.8% is the lone gainer among automaker stocks

Equinet (analyst Tim Schuldt)

  • Unlikely to get clarity on magnitude of the risks in the short term so this will weigh on sentiment
  • Suppliers shouldn’t be directly affected
  • Risks probably largest for Daimler, followed by BMW and VW

JPMorgan (Jose Asumendi)

  • German OEMs are cash rich and can withstand any legal fines
  • Report comes at a time of potential positive re-rating for sector and German automakers in particular due to expected strong 2Q earnings and VW clarifying diesel issues
  • These press reports will weigh on German automakers versus suppliers for some time

Kepler Cheuvreux (Michael Raab)

  • Antitrust fines have been a fraction of what they could be, but cases may stretch on for years
  • This means uncertainty increasing for BMW, Daimler and VW
  • With Daimler and VW having allegedly reported themselves to authorities, one could argue that with effective fines they could be better off than BMW on a relative basis

Warburg (Marc-René Tonn)

  • EU fine on truckmakers in collusion case was EU2.9b for a 14- year period of price fixing, may be even higher for carmakers given higher revenue and longer-time horizon

Exane BNP (Stuart Pearson)

  • Worst-case outcome for Germany’s OEMs would be fines of EUR8b- EU19b, or EU0-EU6b if self-reporting leniency applies
  • Level of wrongdoing “far from clear,” and relevant portion of revenue on which to base any fine “also opaque”
  • Notes that the EU took very narrow view of applicable revenue when calculating truckmaker fines
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