By Steve Goldstein
German stocks rose after Social Democrats captured the biggest share of the vote in a close contest, beating the center-right bloc led by outgoing Chancellor Angela Merkel.
The result is likely to result in the SPD party led by Olaf Scholz heading a government, though the alliance led by Armin Laschet also could lead the government. A so-called traffic light coalition, with the SPD, the Greens and the pro-business Free Democrats, is seen as the most probable outcome.
“The conservative CDU/CSU and the social-democrat SPD have come out almost neck and neck in Germany’s federal election, meaning either one has the potential to lead a likely moderate coalition government. The left-wing Die Linke party’s poor election showing appears to have ruled out a left-wing alliance, and its likely negative impact on German stocks,” said analysts from the BlackRock Investment Institute.
A second question is just how long it will take for a coalition to be reached. “This time around, there might be some pressure not to dilly-dally for quite as long through the middle of the second pandemic winter, during which voters might insist on having a democratically legitimized government capable of acting,” said Martin Moryson, chief economist for Europe at DWS.
The yield on the 10-year bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +16.99% wobbled, and recently rose to -0.21% from -.23%.
The German DAX /zigman2/quotes/210597999/delayed DX:DAX -0.80% rose 0.6%, while the U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.04% rose 0.1% and the French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.72% added 0.4%.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0529% fell to $1.17 from $1.1721.
The biggest Stoxx 600 advancer was Rolls-Royce /zigman2/quotes/203646520/delayed UK:RR -2.40% , as the aerospace engine maker reached a 30-year contract to power the B-52 program from the U.S. Air Force, and separately said it would sell its ITP Aero unit for €1.7 billion to a consortium led by Bain Capital.