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EUR & JPY: Euro-zone & Japan to be hit by auto sector - MUFG

FXStreet (Delhi) – Derek Halpenny, Research Analyst at MUFG, notes that the fallout from the emissions scandal at Volkswagon clearly has the potential to escalate to other companies and if 11mn Volkswagon vehicles are estimated to have been impacted by this, it is difficult to envisage a scenario where not one other company will get caught up in this scandal. If Volkswagon knew how to cheat the emissions test, it seems reasonable to assume that other companies knew too.

Key Quotes

“This therefore really does have the potential to impact global financial markets for a notable period and also to impact economic activity. If this spreads beyond Volkswagon then there are implications for countries other than Germany.”

“Looking at a selection of mainly major developed economies and taking exports of cars and vehicle parts as a percentage of total exports, Japan has the largest weighting in exports at 18.3%, followed by Germany at 15.1% and then Spain at 12.3%. South Korea auto and auto parts exports account for 11.2% of total exports.”

“If the crisis was to worsen it could also have a bearing on monetary policy. The tightening of financial market conditions pointed out above is in part due to the renewed decline in equity markets. The Euro Stoxx 600 Automobile & Parts index is down nearly 15% in three trading days.”

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