European Markets Surge as Germany’s Election Results Boost Investor Confidence

European stock futures and the euro climbed on Monday after Germany’s election results yielded a mainstream outcome. DAX futures jumped by 1.2%, while the euro rose 0.44% to $1.0507, approaching its January high. EUROSTOXX 50 futures increased by 0.66%, and FTSE futures gained 0.1%. However, uncertainty remains as Friedrich Merz, the new conservative leader of Germany, still needs to form a coalition government. The process could take time, especially with discussions around potential coalition partners.

In Asia, trading volumes were thinner due to a holiday in Tokyo, with the MSCI Asia-Pacific index excluding Japan dipping 0.5%. Chinese stocks saw slight declines, with the CSI300 down 0.26%, and Hong Kong shares dropped 0.34%. Analysts observed that Chinese authorities are shifting their stance on Big Tech, which could lead to higher equity valuations and attract foreign investment, thus easing pressure on emerging markets.

U.S. stock futures gained as investors hoped Nvidia’s earnings report would justify the tech sector’s high valuations. However, U.S. markets struggled on Friday, with the Dow and S&P 500 both falling by about 1.7%. Inflation concerns resurfaced after a consumer survey showed rising inflation expectations. The Federal Reserve is expected to remain cautious on rate cuts, with the market speculating that easing could occur in July, although uncertainty persists.

In commodities, gold prices remained steady at $2,937 per ounce, supported by consistent demand, while oil prices declined. Brent crude fell to $74.37 per barrel, and U.S. crude dropped to $70.27 per barrel, partly due to speculation that a peace deal in Ukraine could result in eased sanctions on Russia, boosting its oil exports. The dollar weakened against the yen, reflecting concerns over rising Japanese yields and the potential for further rate hikes by the Bank of Japan.

SOURCE: REUTERS