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German Shares Jump; Volkswagen Falls After FY26 Outlook Cut

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The blue-chip DAX index closed Monday's trading session 1.07% higher, while Volkswagen (VOW.F, VOW3.F) slipped after lowering its full-year 2026 guidance.

The German carmaker on Sept. 18 issued a 2026 profit warning amid a 6 billion-euro non-cash impairment at Porsche AG (P911.F), restructuring costs, and headwinds in China. Volkswagen expects one-off special charges to hit operating profit by up to 10 billion euros, reducing its expected operating margin to a maximum of 1% from a previous 4% to 5.5% target.

"The earnings miss is largely driven by special items, with underlying profitability remaining broadly consistent with consensus expectations. Said differently, EUR10bn of charges are eye-catching. But what matters for equity holders is that underlying margins remain around 4% and cash generation remains intact. In our view, the announcement does not materially alter the core investment debate. Investors have long expected that restructuring a company of VW's scale would involve substantial charges and asset write-downs," Deutsche Bank Research said in response to the outlook downgrade. Volkswagen lost 0.79%, while Porsche AG was down 2.74% on Xetra.

On the political front, Sunday's regional elections dealt a major blow to German Chancellor Friedrich Merz's CDU party, which slipped to 19% in Berlin and failed to reach the 5% parliamentary threshold in Mecklenburg-Vorpommern. The far-right AfD topped the polls in Mecklenburg-Vorpommern with 38.3%, despite being seen to lack a path to enter government, while Die Linke took first place in Berlin at 25.3%.

"Merz called the north-eastern state result a 'disaster' but said he will stay on as Chancellor and press ahead with his reform agenda. The pressure on Merz nonetheless increases further, raising the likelihood of a change of Chancellor and reinforcing a slowly building political-risk-premium narrative, though a breakdown of the federal coalition still looks unlikely for the time being," Danske Bank wrote.

For the week ahead, global flash September PMIs are expected to be key economic catalysts, while geopolitical attention shifts to New York for the UN General Assembly and a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. Sentiment indicators will also be in focus, with consumer confidence prints for the eurozone on Tuesday and Germany on Friday, as well as the ifo survey expected on Thursday.

What else is happening in Asia Markets?

Asia Markets

Tadawul Equities Start Week Lower; Saudi's Business Operating Revenue Index Rises in July

The Tadawul All Share Index closed Sunday 0.26% in the red as investors keep their eyes on Saudi Arabia's latest geopolitical updates and economic data.The Houthi group struck multiple locations in Saudi Arabia over the weekend. The group said it attacked "sensitive" sites, such as the Saudi Arabian Oil Co. (SASE:2222), d/b/a Saudi Aramco's, Yanbu-based facility. Aramco shares closed 1.33% higher.Also dampening sentiment is the continued conflict between Ukraine and Russia, with Ukraine launching drone attacks on Moscow, which caused casualties and infrastructure damage.Back at home, and according to preliminary data from the General Authority for Statistics, the kingdom's operating revenues index increased 4.9% annually in July."On a monthly basis, the Operating Revenues Index increased by 1.2%, supported by increases of 0.8% in manufacturing activities, 6.4% in mining and quarrying activities, 0.1% in construction activities, and increases of 3.7% and 0.6% in information and communication activities and accommodation and food service activities, respectively," the report said.Meanwhile, the employee compensation index climbed 7.4% year over year, while the issued building permits rose 4.4% annually to 5,828 from 5,582.On the corporate front, Public Investment Fund-owned Roshn Group entered into a preliminary deal with Talaat Moustafa Group's Saudi unit to potentially form a joint company for a mixed-use project in Riyadh.

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Asia Markets

Update: US Equity Indexes Mixed as Benchmark Treasury Yield Jumps Back Above 5%

(Updates with index/price moves, macroeconomic data, and geopolitical news from the first paragraph.)US equity indexes closed mixed on Friday as government bond yields rebounded, with the 10-year yield hovering near its highest level in almost two decades.The Nasdaq Composite rose 0.4% to 26,522.55, the S&P 500 climbed 0.2% to 7,650.50, and the Dow Jones Industrial Average retreated 0.2% to 51,682.64. Materials, utilities and real estate led decliners at the close. Technology led the gainers."We now expect two more hikes from the [Federal Reserve], and our commodity analysts see energy markets facing a convergence of supply chain disruptions," Morgan Stanley said in a note after a 25 basis-point increase announced on Wednesday, the first policy tightening since 2023. "A higher expected path for oil prices means disinflation will be slower, and more restrictive policy also weighs on growth in 2027."Morgan Stanley expects two 25 basis-point rate increases in December and March to a target range of 4.25 to 4.50%. "They hold there through the end of next year."US Treasury yields rose after midday. The 10-year yield jumped 5.3 basis points to 5%, trading near its strongest level since 2007. The two-year yield climbed 6.2 basis points to 4.75%, a multi-month high.US equity funds recorded outflows for a fourth consecutive week as rising crude oil prices heightened inflation concerns and expectations of a Fed rate increase added to investor caution ahead of its policy decision, Reuters reported.The United Kingdom Maritime Trade Operations said an unknown projectile hit a tanker in the Strait of Hormuz, Al Jazeera, a Middle Eastern broadcaster, reported. Earlier, Iran's Islamic Revolutionary Guard Corps said it struck a Togo-flagged tanker as it attempted an "illegal passage" through the strait.The front-month US West Texas Intermediate crude oil contract slumped 2.5% to $99.39 per barrel, while the global benchmark North Sea Brent slipped 1.7% to $103.06 per barrel.In economic news, US industrial production unexpectedly held steady in August as manufacturing output fell after rising for seven straight months, Federal Reserve data showed. Industrial output was nearly flat sequentially last month, following a 0.2% gain in July, according to the Fed. The consensus was 0.3% for August in a Bloomberg-compiled survey.The Conference Board's measure of leading indicators slipped 0.1% in August, compared with expectations for a 0.1% gain in a Bloomberg-compiled poll and a 0.2% advance in July. The reading is the first monthly decline since March.In company news, Nucor (NUE) shares slumped 6%, one of the S&P 500's worst performers, after the company said late Thursday it expects Q3 earnings of $5.55 to $5.65 per diluted share, below analysts' consensus.

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Asia Markets

US Equity Indexes Mixed This Week as Benchmark Treasury Yield Trades Near 19-Year High Following Fed Rate Increase

US equity indexes closed mixed this week after the Federal Reserve reaffirmed its commitment to controlling inflation and tightened policy for the first time since 2023. Crude oil prices remained elevated above $100.* The S&P 500 closed at 7,650.14 on Friday, versus 7,656.98 a week ago. The Nasdaq Composite stood at about 26,522.55, compared with 26,333.04 a week earlier. The Dow Jones Industrial Average ended at 51,681.93, versus 52,573.29 at the end of last week.* Communication, healthcare, and technology were among the top gainers, while utilities, financials, and real estate were among the steepest decliners.* The US Federal Reserve raised its benchmark lending rate by 25 basis points in a unanimous vote on Wednesday to combat sticky inflation, while signaling another hike later this year. The Federal Open Market Committee raised the federal funds rate to 3.75% to 4%, the first time it has tightened monetary policy since July 2023.* "After more than five years of significantly elevated inflation, a period which included a rate-cutting cycle, the new Warsh Fed appears to be taking a step in the right direction to combat dangerously high price pressures," Lindsey Piegza, Stifel chief economist, said in a note.* The 10-year yield rose 5.1 basis points to 5%, trading close to its highest since 2007.* The United Kingdom Maritime Trade Operations said an unknown projectile hit a tanker in the Strait of Hormuz, Al Jazeera, a Middle Eastern broadcaster, reported. Earlier, Iran's Islamic Revolutionary Guard Corps said it struck a Togo-flagged tanker as it attempted an "illegal passage" through the strait.* The front-month US West Texas Intermediate crude oil contract fell 1.2% to $100.67 per barrel, while the global benchmark North Sea Brent declined 1.2% to $103.57 per barrel late Friday.

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