European stakes increase on German election respite, oil surge
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German stocks rose to a ten-day high on Monday after the federal election result lowered the likelihood of a left-wing coalition forming a government, while broader European markets applauded a rise in crude prices, which boosted oil stocks. The blue-chip DAX in Germany gained 0.9 percent, leading regional index advances, while the Pan-European STOXX 600 index gained 0.4 percent.
After barely winning their first national election since 2005, Germany’s center-left Social Democrats said they will seek to form a coalition with the Greens and the liberal Free Democrats in what has been termed the “traffic light” alliance. While the formation of a new government may take some time, markets were relieved that the hard-left Linke party fell short of the 5 percent barrier required to enter parliament.
“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,” according to BlackRock (NYSE:BLK) Investment Institute. “We see the election outcome eventually resulting in a moderate left or right leaning government.” The biggest gainers on the DAX were German real estate developer Vonovia, aircraft engine maker MTU Aero Engines (OTC: MTUAY), and renewables company Siemens Energy. The oil and gas index rose 1.8 percent to a three-month high as Brent futures approached $80 a barrel due to supply concerns. [O/R]
Total Energies, Royal Dutch Shell (LON: RDSa), and BP (NYSE: BP) all climbed between 1.8 and 2.4 percent, giving the STOXX 600 the biggest boost. While investors are concerned about hawkish central bank policies, the consequences from China Evergrande’s financial difficulties, and inflation, they are hopeful that immunization will drive a sustained global recovery.
The STOXX 600 index has risen 16.5 percent this year, falling just short of Wall Street’s S& P 500’s 18.6 percent advance.IWG Plc soared 6.3 percent to the top of the STOXX 600 after Sky News claimed that the British office rental firm is considering a multi-billion-pound split into several firms.
Zooplus AG rose 4.2 percent after Swedish private equity firm EQT (NYSE: EQT) AB made an offer to buy the online pet supplies store for approximately 3.36 billion euros ($3.94 billion), edging out a 3.29-billion-euro deal from US private equity Hellman & Friedman.Cellnex Telecom of Spain fell 3% after Citigroup (NYSE:C) downgraded the company to “sell,” citing valuation concerns.