German election brings some relief to European markets

An election win for Germany’s conservatives has eased concerns of political gridlock in Europe’s biggest economy, though it failed to lift uncertainty around whether a new government can deliver fiscal reforms that would boost sluggish growth.

Germany’s domestically-focused mid-cap stock index rose 1.4 per cent on Monday, one of it biggest daily jumps this year, and the euro briefly touched a one-month high, as the conservatives looked most likely to form a two-party coalition with the Social Democrats.

“There is an immediate relief that there were no big nasty surprises in the election outcome, and a centrist-leaning government will persist and could even pivot more towards business and investment friendly policies,” said Charu Chanana, Saxo’s chief investment strategist.

Dublin

Bank of Ireland was the biggest mover on the day, rising 4 per cent to €10.86 after the lender reported full-year results showing pretax profit declined by 4.2 per cent to €1.86 billion last year.

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Chief executive Myles O’Grady also said he plans reduce his almost 11,200-strong workforce over the next three years to keep running costs in check as interest rates settle well below their recent peak. Rival AIB rose by 0.8 per cent to €6.39 amid more upbeat sentiment across European bourses generally. Elsewhere home builder Cairn Homes was down 1.15 per cent to €2.15. The company will publish full-year results on Thursday.

London

London’s FTSE 100 was treading water on Monday while Germany’s top equity index held on to gains as investors reacted to the country’s conservatives winning the national election.

The UK’s blue-chip index dipped 0.39 points to close at 8,658.98.

Weapons-maker BAE Systems was among the day’s biggest risers amid the UK government announcing a new package of sanctions against Russia over its war in Ukraine.

Losses for mining stocks, including Endeavor Mining, Antofagasta and Fresnillo, however, were helping drag the index lower on Monday.

Europe

In Frankfurt, the Dax moved 0.62 per cent higher in a positive session for Germany’s top index after the results of its federal election were released on Sunday.

The head of the centre-right opposition, Friedrich Merz, won while far-right party AfD made the biggest gains to come in at second place.

Konstantin Oldenburger, a market analyst for CMC Markets, said: “This morning’s initial reaction from the Dax reflected investor relief over the fact that, following the Bundestag election results, there is only one viable coalition option involving two parties.

“However, the absence of follow-up purchases can likely be attributed to the understanding that the crucial negotiations between the Union parties and the SPD (Social Democratic Party) are yet to come.”

Over in Paris, a weaker session saw its Cac 40 index close 0.78 per cent lower.

In company news, shares in Wood Group soared more than 40 per cent after the engineering firm confirmed it had received a fresh takeover approach from Dubai-based buyer Sidara.

It marks the second approach after Sidara walked away from a deal last August, having put forward four takeover proposals – the latter valuing the firm at about £1.6 billion.

Wood Group’s share price, which has fallen sharply in recent days, shot up 41.3 per cent on Monday.

New York

Wall Street’s main indexes were mixed in choppy trading on Monday, as investors awaited results from chip giant Nvidia for clues on the future of demand for artificial intelligence technology.

Most megacap stocks fell, with Tesla, Meta and Microsoft down between 1 per cent and 2 per cent.

Microsoft has scrapped leases for sizeable data centre capacity in the US, suggesting a potential oversupply of AI infrastructure, TD Cowen analysts said in a note published late on Friday.

The news came weeks after the launch of low-cost AI models from China’s DeepSeek in January rattled tech stocks and stoked doubts about whether US companies were spending too much on the technology and overestimating demand going ahead.

“It seems like this is a sector that I think has gone too far, too fast and yet everything you hear is a lot of these companies are still coming out saying that they are still spending,” said Joe Saluzzi, co-founder of Equity Trading at Themis Trading.

Nvidia’s quarterly results, expected on Wednesday, puts the chip sector in the spotlight for the week.

“ (Nvidia) is a stock that has moved so much so quickly. So (it) better have really good earnings and people will be looking at guidance and spending going forward,” Saluzzi said.

Shares of Nvidia were flat on Monday while most other chip stocks declined. The broader Philadelphia SE Semiconductor Index was down 0.6 per cent. Additional reporting by Reuters