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LONDON (Alliance News) - UK stocks staged a broad-based rebound Wednesday, holding firm despite a weak US open, while troubled carmaker Volkswagen's Chief Executive resigned amid the company's exhaust emissions scandal.

The FTSE 100 closed up 1.6% at 6,032.24 points, the FTSE 250 ended up 0.8% at 16,659.85 and the AIM All-Share rose 0.1% to 731.38.

European stocks also closed higher, with the CAC 40 in Paris ending up 0.1% and the DAX 30 in Frankfurt closing up 0.4%.

Shares in Volkswagen rose 6.9%, having fallen 31% over the past two sessions on a US investigation into the installation of software on its diesel cars that cheats emissions tests.

German prosecutors launched an investigation Wednesday into Volkswagen over an emissions testing scandal as the embattled carmaker's board held a crisis meeting that decided the future of chief executive Martin Winterkorn. In a statement Wednesday afternoon, Winterkorn said that he was stepping down to take "full responsibility" for the scandal that has rocked the carmaker.

The embattled auto group wants "a new credible beginning," said supervisory board chief Berthold Huber after the meeting of the company's five-member presidium.

A successor for Winterkorn is to be announced on Friday.

Meanwhile, German Transport Minister Alexander Dobrindt rejected claims that his department had prior knowledge of the revelations, which have rocked the country's auto sector.

"Like everyone else, I have first read about it on the weekend in the newspaper," Dobrindt said following a meeting of the German parliamentary transport committee.

Michael Hewson, chief market analyst at CMC Markets said: "Despite today’s recovery be under no illusions the Volkswagen brand faces an uncertain future as prosecutors across the globe start to launch criminal enquiries into the company’s conduct."

Shares in engineer GKN and platinum group metals company Johnson Matthey posted strong gains, up 2.7% and 2.9% respectively, having fallen heavily on the back of VW's woes.

Volkswagen is a major customer for GKN and its Driveline business. For Johnson Matthey, Carsten Menke, commodities research analyst at Julius Baer, noted that the Volkswagen scandal hurt the platinum market on Tuesday due to fears that German car manufacturer’s diesel disaster could weigh on demand for automotive catalysts. However, the analyst said that the reaction was overdone.

US stocks were trading lower at the London close. The DJIA was down 0.5%, the S&P 500 was up 0.3% and the Nasdaq Composite was down 0.1%.

Elsewhere on the London stock exchange, Smiths Group was one of the best blue-chip performers for most of the session and closed up 1.1%. The engineering company reported an increase its profit in the year to the end of July, helped by improved margins, as revenue fell owing to a tough year for its John Crane energy services business, offset by a good performance in its Medical division.

Smiths, which has operations spanning energy services, medical devices and security sensors, said its pretax profit for the year was up to GBP459.0 million from GBP445.0 million a year earlier. The increase in profit was driven by a better operating margin in the year, up to 17.6% from 17.1%, which offset a 2% decline in revenue to GBP2.90 billion from GBP2.95 billion.

However, the company added that the outlook for John Crane is tough and said its results in the current financial year will be more weighted to the second half than normal.

In the FTSE 250, Premier Oil was the best performer, closing up 6.1% after it said production is currently running above its full-year guidance, as it continues to focus on lowering costs and using its substantial hedging programme to battle the downturn in oil prices.

The oil and gas producer said production since the start of 2015 has averaged 57,100 barrels of oil equivalent per day after the company completed its summer maintenance activities. In terms of sales, Premier has hedged around 60% of its production in the second half of 2015 at USD92 per barrel and 30% of its production in 2016 at USD68 per barrel. Both those prices compare favourably to current Brent prices, which was trading at USD49.37 per barrel at the London close.

UBM closed up 4.5% at 502.6135 pence after Liberum said the potential sale of PR Newswire would have a positive read-across for UBM, as it would turn the company into a fully-focused events business, and drive a re-rating. Press speculation has suggested that PR software and intelligence provider Cision, which is owned by private equity firm GTCR, is preparing a bid for PR Newswire. The broker reiterated its Buy rating for the stock with a price target of 700 pence.

Away from stocks, European Central Bank President Mario Draghi said the central bank needs more time to determine whether the downside risks to euro area growth call for an increase in asset purchases.

In his introductory remarks at a hearing in the European Parliament in Brussels, Draghi said, "More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature and to assess the driving forces behind the drop in the international price of commodities and behind the recent episodes of severe financial turbulence."

In the economic calendar Thursday, Japanese manufacturing PMI is at 0235 BST, German Gfk consumer confidence survey results are at 0700 BST, before German IFO business sentiment index is at 0900 BST and British Bankers' Association mortgage approvals at 0930 BST. In the afternoon, there are US continuing and initial jobless claims at 1330 BST alongside durable goods orders and Chicago Fed national activity index. Following this is US new home sales at 1500 BST and Kansas Fed manufacturing survey at 1600 BST.

At 2200 BST US Federal Reserve Chair Janet Yellen will be speaking at the University of Massachusetts Amherst about inflation dynamics and monetary policy.

In the UK corporate calendar, there are trading statements from travel operator Thomas Cook Group, private equity investor SVG Capital, design, engineering and project management consultancy WS Atkins, publishing and events company Euromoney Institutional Investor and Daily Mail General Trust.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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