LONDON: European stock markets headed south Thursday in yet more volatile trading as a spreading Volkswagen scandal offset positive German data.
Investors were meanwhile awaiting an update on the outlook for US interest rates, with the euro up against the dollar ahead of a speech later in the day from Federal Reserve chief Janet Yellen.
London's benchmark FTSE 100 index fell 0.80 percent compared with Wednesday's close to stand at 5,984.14 points in afternoon trading.
In the eurozone, Frankfurt's DAX 30 slumped 1.79 percent to 9,440.20 points and the Paris CAC 40 shed 2.19 percent to 4,335.64.
Europe's main stock markets closed higher Wednesday, recovering some of the previous session's sharp losses.
"It is clear this Thursday that investors don't know what to make of the market landscape at the moment, with the indices lurching between losses and gains throughout the morning," said Connor Campbell, analyst at Spreadex trading group.
"The lack of a consistent trading direction is likely a product of a market cocktail containing a dash of post-Fed statement confusion, a shot of lingering China-fear, and a sprinkling auto-sector sickness -- a brew that leaves few economic anchors for investors to cling to."
All eyes were expected to be on the speech from Yellen, during which markets hope she will provide more clarity on the bank's plans for an interest rate hike.
The Fed last week held fire on interest rates, citing concerns about how the slowdown in China would hit the US economy.
US stocks opened lower, with investors there also cautious ahead of Yellen's speech.
Five minutes into trade, the Dow Jones Industrial Average had dropped 0.94 percent to 16,127.33.
The broad-based S&P 500 fell 0.74 percent to 1,924.45, while the tech-rich Nasdaq Composite Index shed 0.75 percent to 4,717.11.
In foreign exchange, the euro rose to $1.1259 from $1.1180 late on Wednesday in New York.
- VW shares recover -
Meanwhile auto giant Volkswagen searched Thursday for a new chief to steer it out of a global pollution cheating storm, as suspicions over diesel car emissions spread for the first time to fellow German manufacturer BMW.
Shares in top-of-the-range automaker BMW skidded nearly 10 percent at one point after the weekly Auto Bild reported that emissions from one of its diesel models were 11 times higher than European Union norms.
There was no indication that BMW had engaged in deception similar to Volkswagen's by using software to fool official pollution tests, but the report of high emissions from one of its diesel-engine cars nevertheless shook investors.
In afternoon trade, Volkswagen shares were up 1.88 percent at 113.60 euros, extending a rebound after slumping at the start of the week.
BMW, though, was down 5.59 percent to 75.33 euros.
The spreading crisis offset news that German business confidence beat expectations by rising slightly in September, reflecting the continued robustness of Europe's biggest economy amid the current financial market turbulence.
The Ifo institute's closely-watched business climate index rose to 108.5 points this month from 108.4 points in August, beating analysts' expectations for a slight fall.
Asian markets mostly recovered Thursday from the previous day's sharp losses, but Tokyo tumbled as investors returned from a long weekend to play catch-up, with auto giants hit by the Volkswagen scandal.
Shanghai ended 0.86 percent higher, Sydney climbed 1.47 percent and Seoul added 0.13 percent.
But Hong Kong continued to drop, shedding 0.97 percent by the close. Tokyo finished 2.76 percent down, with carmakers among the biggest losers on Japan's Nikkei.
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