European stocks nudged higher on Wednesday as investors sought bargains after heavy losses in the previous session, with automakers rebounding and oil companies underpinned by higher crude prices. Shares in German carmaker Volkswagen rose as much as 9 percent in volatile trade. It had lost about a third of its value in the previous two sessions, after the carmaker got caught up in a scandal that Deutsche Bank called an "investor's nightmare".
The United States has accused Volkswagen of rigging its cars to conceal their emissions level when the engines were tested. Is chief executive, Martin Winterkorn, resigned on Wednesday. Traders said Volkswagen's rise, accompanied by other gains by auto makers, were triggered by short covering. They cautioned against taking positions in the stock, which fell nearly 10 percent in early trading. One trader said talk of a potential take-over by Fiat Chrysler also helped.
The pan-European FTSEurofirst 300 index was up 0.65 percent, with analysts saying investors were taking advantage of recent share price declines and finding value in some stocks. Stocks in the US were little changed. "Shares in Europe are seeing a partial recovery, but volumes are low as caution remains following last week's uncertain message from the Federal Reserve," said Enrico Vaccari, a fund manager at Italy's Consultinvest. "European markets trade at a discount to the US and this in the medium term should convince investors to buy".
The market also got some support from energy shares as crude rose more than 1 percent. It had dropped after a survey showed activity in Chinese manufacturing slowed to its weakest in 6 1/2 years. The European oil and gas index rose 1.4 percent. "Somewhat surprisingly, the negative reaction to the disappointing Chinese data was very limited, indicating that much of the bad news has already been priced in," said Markus Huber, a senior analyst at Peregrine & Black.
"As the Volkswagen shock slowly fades, general positive economic fundamentals and supportive central bank stances should increasingly lend support to markets." Mining shares also gained 1.3 percent. They had fallen to their lowest level since 2009 as prices of copper and nickel advanced. International Airlines Group rose more than 4 percent after Morgan Stanley made the airline operator its overweight pick in the sector, raising its target price and earnings forecasts.
Smiths Group rose 1 percent as the British engineering conglomerate reported results in line with forecasts, following recent earnings misses in the sector. Coloplast fell 4.8 percent after the Danish healthcare product maker issued its third profit warning this year after setting aside 3 billion Danish crowns for a US lawsuit.
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