European stocks head for their best monthly gains this year, but Volkswagen shares sink on further dieselgate provisions. As David Pollard reports, the carmaker is adding 2.5 billion euros to the 20 billion euros the scandal has already cost the company.
Clear blue sky ahead for Europe's share prices as markets enjoy their best gains this year .... But the same can't be said of Volkswagen. The German carmaker once more upping its emissions scandal provisions. An extra 2.5 billion euros this time - related, it says, to US buybacks and retrofits being more complex and time-consuming than thought. It adds to a bill that already stands at around 20 billion. (SOUNDBITE) (German) HEAD OF CAPITAL MARKET ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: "VW's profit warning was overdue. It's common knowledge that if Americans want to hurt someone they do it right. So they're better to increase provisions - in order to be able to say 'our provisions were too high' later on" The news pushed VW shares down three per cent at the European open. But overall, stocks were on course to a three-month high. A euro that's eased back from this year's strong surge helping propel gains - especially for the exporter-heavy DAX. Analysts at Deutsche Bank are pencilling eleven per cent earnings growth this year. Though some others are more cautious. (SOUNDBITE) (English) GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON, SAYING: "On the whole the headwinds I think coming from the currency market as far as equities are concerned are quite considerable. And I think that as we you know we start to see the third quarter numbers come out over the course of the next few few weeks you'll probably see that the earnings numbers weren't quite as stellar as they as they have been. And I rather suspect therefore that European markets will probably range trade for the next few weeks." One sector that could tempt is cars. Goldman Sachs upgraded to overweight earlier this month. On the basis that - with a relative price to earnings discount of 60 per cent - the sector's cheap. Even if for some within it, dieselgate is still proving very expensive.