Europe close: DAX dives on euro peaks and colluding carmakers

European stocks ended the week firmly in the red as the euro continued to march higher, with the strength in the single currency weighing on exporters and car makers were hit by reports of collusion in the industry, combining to send the Dax to new three-month lows.

On a more positive note, also on Thursday evening the IMF agreed 'in principle' to provide another $1.8bn towards a rescue for Greece, conditional on other euro area nations providing debt relief.

At the close, the benchmark Stoxx 600 had lost just over 1% or 3.91 points to 380.16, with the Dax down 1.66% or more than 207 points to 12,240.06, while in Paris the Cac-40 finished 1.57% or almost 82 points lower at 5,117.66.

From a sector standpoint, shares in automobile manufacturers were doing worst, with the Stoxx 600 gauge for the industry down by 2.77% to 545.42, with a report on illegal collusion between carmakers also weighing.

The brakes were slammed on Germany's and France's big carmakers after Volkswagen​ alerted EU ​competition ​authorities ​about secret meetings at which the German carmakers colluded to fix the prices of diesel emissions treatment systems using industry committees, according to reports in Germany. The Handelsblatt daily said the EU competition authorities are looking into the suspicion of collusion due to an Audi presentation seized in raids at parent company Volkswagen.

"This new chapter in the diesel saga needs to be taken seriously," analysts at Evercore said in a note. "Our conclusion is that there might be a risk of several hundred millions or even low billions."

In parallel, euro/dollar was higher by 0.4% to 1.1676, it's highest in two and half years.

However, as some analysts pointed out, past a certain threshhold euro strength might push the European Central Bank's goal of meeting its inflation target further into the future. On the flip-side, currency appreciation entailed a tightening in financial conditions which was equivalent to interest rate hikes.

Commenting on the market action, analyst Neil Wilson at ETX Capital said the post-ECB euro rally continued to weigh.

"It does look like Mario Draghi can barely sneeze without the market catching a cold – how this taper is going to proceed smoothly is a major doubt. The DAX had another bad day at the office, fading 250 points, or 2% at one stage, before ending down 202 points in its second big selloff of the week to take the losses for the last 5 sessions to more than 3%."

GDP forecasts for 2017 and 2018 on the other hand were revised higher by two tenths each to 1.9% and 1.8%.

Italy's Benetton family was vying with motorbike manufacturers and buyout to take over one of the country's most iconic manufacturers, Ducati, Reuters reported.

French luxury goods outfit Hermes said it expected foreign exchange tailwinds to help it keep its operating margins near the record 33.9% level reached in the first half of 2016.

Faurecia lifted its 2017 outlook for earnings after delivering a bumper 20% increase for operating profits at the half-year stage.