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Europe Markets: European stocks stage recovery in wake of German political turmoil

November 20
19:05 2017

European equities turned modestly higher Monday, with German equities recovering following the collapse of talks to form a coalition government for the eurozone’s largest economy.

What markets are doing: In Frankfurt, the DAX 30 index DAX, +0.18% turned up 0.2% to 13,013.75, turning around from a decline of 0.5%.

France’s CAC 40 PX1, +0.20% was up 0.2% at 5,329.47, and the U.K.’s FTSE 100 UKX, +0.08% edged up 0.1% to 7,388.76.

Spain’s IBEX 35 IBEX, +0.27%  reversed losses and rose 0.3% to 10,036.70, and the Stoxx Europe 600 SXXP, +0.34% swung higher, rising 0.3% to 385.10. The financial sector was the only one in the red, and gainers were led by health care and telecom stocks.

The euro EURUSD, -0.1526%  bought $ 1.1781 after hitting an intraday low of $ 1.1723. The shared currency late Friday in New York fetched $ 1.1793. Against the pound, the euro EURGBP, -0.3363% traded hands at £0.8893 versus £0.8923 on Friday.

What’s moving markets: Stocks started in the red after talks to form a “Jamaica” governing coalition of parties in Germany broke down. On Sunday, the pro-business Free Democratic Party ended talks about forming a coalition government with Merkel’s Christian Democratic Union and the center-left Greens.

But German equities started to turn higher and the euro EURUSD, -0.1526%  came off session lows against the U.S. dollar following a Monday report that the FDP said it would support a minority government. German President Frank-Walter Steinmeier will make a statement at 2:30 p.m. local time, or 8:30 a.m. Eastern Time, according to Bloomberg

The breakdown in talks puts Merkel’s fourth term as chancellor in doubt, as well as raising the prospect of a minority government and perhaps eventually a new general election if the situation can’t be resolved.

What strategists are saying: “European equity markets have picked up where they left off last week, heading lower after the FDP walked out of German coalition talks,” said Rebecca O’Keeffe, head of investing at Interactive Investor, in a note release before news about Steinmeier’s statement.

“Chancellor Merkel is also one of the few European politicians who has demonstrated she may be prepared to compromise with Britain, rather than run the risk that [U.K.] Prime Minister May is replaced by a hardline Brexiteer. With almost unsurpassed political experience, markets will want Germany to find a quick solution, preferably one that leaves Mrs. Merkel in situ,” she said.

Stock movers: Altice NV ATC, +8.64%  shares jumped 8.6% after the French telecommunications group said it has no plans to raise capital. The company recently announced a management shakeup in the wake of disappointing third-quarter results and a slide in its share price.

RWE AG RWE, +2.47%  rose 2.6% following a Reuters report over the weekend that the German utility is considering ways to cut its stake of €16.8 billion ($ 19.8 billion) in its Innogy retail business. One option includes doing a deal with Italy’s Enel ENEL, +0.19%  , the report said.

NEX Group PLC NXG, -0.84% fell 2%, but was off session lows, as the electronic financial trading company cut its interim dividend and said profit fell in the first half of fiscal 2018.

Mediclinic International PLC MDC, -0.18%  fell 0.3% after the private hospital company said it’s ditching plans to make an offer to buy Spire Healthcare Group PLC SPI, -7.45%  . Spire shares fell 5.3% on the mid-cap FTSE 250 index.

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