European stock markets were marginally higher Monday morning as investors digested election results out of Germany, where the nationalist Alternative for Germany (AfD) won parliamentary seats for the first time.
The pan-European Stoxx 600 was 0.16 percent higher with the major bourses moving in different directions. Banking stocks became the worst-performers in mid-morning deals with Commerzbank and Deutsche Bank down about 1.3 percent. Overall, market sentiment was dominated by the outcome of the German vote.
Euro under pressure; Tullow Oil up 5%
Chancellor Angela Merkel won a fourth term in office on Sunday, but she is due to face tough political negotiations to form a new governing coalition. At the same time, she will also have to deal with a more fractured parliament after the anti-immigration; far-right AfD party beat expectations and became the first far-right party to join the Bundestag in more than half a century.
The euro was under pressure since the start of the Asian session. The currency was trading at $1.1908 at 09:45 a.m. London time, down by 0.37 percent.
Looking at individual stocks, the Swedish builder NCC hit the bottom of the European benchmark, down by more than 7.5 percent after issuing a profit warning.
The largest Scandinavian payments processor Nets received a takeover offer from Evergood 5. The former jumped to the top of the European benchmark, up by more than 6 percent, on the news. Meanwhile, Tullow Oil jumped 5.8 percent on expectations that it will resume drilling at ten fields.
Also in the corporate world, Lufthansa is prepared to pay 200 million ($238.67 million) euros to buy assets from the insolvent AirBerlin, according to Reuters. The airline was at the top of the German benchmark, up by 2 percent.
In other news, ABB is to buy General Electric’s Industrial Solutions business for $2.6 billion.
Brexit talks resume; BoE wants further capital buffers
Meanwhile, Brexit negotiators are set to resume talks Monday in Brussels after U.K. Prime Minister Theresa May asked for a transition period after March 29, 2019 – when the U.K. officially leaves the European Union. However, during a speech in Florence last Friday, May failed to outline what the “new relationship” between the EU and the U.K. could look like. Without firm offers, the EU cannot negotiate a trade deal, let alone a transition deal, Michel Barnier, the EU’s chief negotiator said.
On the data front, the German Ifo Business Climate for September dropped to 115.2 points from 115.9 in the previous month, data showed Monday morning.
“Companies were less satisfied with both their current business situation and their short-term outlook than in August. Germany’s economy nevertheless goes into the new legislative period with a strong tailwind,” Clemens Fuest, president of the Ifo Institute, said in a statement.
The Bank of England said Monday morning that banks will have to hold an additional 10 billion pounds ($13.5 billion) as consumer credit poses added risks.
European Central Bank President Mario Draghi is due to speak at the European Parliament at 2:00 p.m. London time.