German Elections: What does it mean for markets?

23rd September 2013

As they enter their historic third term in office German Chancellor Angela Merkel and her conservative party are seeking a coalition partner but experts believe the continuity of power should appease markets.

Having won Germany’s election but coming in just shy of an absolute majority, at 41.5% Merkel’s conservative party must look for a new ally as the liberals failed to make it back in to parliament.

It is believed she will look to partner up with the Social Democrats (SPD) who took 26% of the votes.

David Moss, director of European equities at F&C Investments, says markets are likely to take this vote positively as it should mean no-alteration to the strategies which have aided the situation in the beleaguered Eurozone.

He adds: “The result is an overwhelming personal vote for Angela Merkel coming closer to an outright majority than anyone since Adenauer in the post-war period and should provide a strong platform for her to continue to drive her agenda. In recent years this has included strong support for the Euro.

“The rapid rise of the anti-euro party is likely to cause investors some concerns, but markets are likely to take this vote positively as it should mean no change in the policies that have helped to improve the situation in the Eurozone in the last 18 months, albeit Merkel has been clear this will mean continued austerity.”

“We must wait until the new Government is formed to see what roles other parties will have, and what impact these could have on policy. As ever investors will be less happy with this period of uncertainty. Ultimately, Angela Merkel and the CDU/CSU were the clear victors, and as such this is a positive backdrop for investors into European equities.

Ultimately the hope and indeed expectation now for Moss, is that after such a resounding victory Merkel can continue to drive the policies that have helped Europe to stabilise and move forward over the last five years.

In the UK market reaction has been muted as by midday the FTSE 100 was trading at 6,572.88, 23.55 points down.

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