Euro, Gold, Oil Drop After German Vote

EghtesadOnline: Politics dominated trading on Monday, with the euro sliding as Germany’s election result foreshadowed potentially complex political-coalition building. Gold fell as West Texas crude retreated.

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26 September 2017

The common currency weakened against almost all its major peers after Chancellor Angela Merkel won Germany’s election with a smaller share of the vote, while the country’s main far-right party, Alternative for Germany, posted a surprisingly strong result, Bloomberg reported.

The yen declined ahead of a fresh stimulus package being unveiled by Japan’s prime minister before possible early elections. Stocks in Europe defied a negative Asia session to edge higher, helped by the weaker euro, but shares in developing nations slumped.

“The question is obviously now what it means for policy going forward” in Germany, Mitul Kotecha, head of Asia FX and rates strategy at Barclays Bank Plc, said on Bloomberg Television in reference to the election. “Investors are going to be closely following announcements on policy, especially given that fact that the right-wing nationalist group AfD is not just nationalist, but also anti-euro to some extent.”

According to Financial Tribune, the process of building a new government could take weeks, so markets may well move on from the result quickly.

Here are the main moves in markets:

Stocks: The Stoxx Europe 600 Index gained 0.1% in London, the highest in more than two months. The MSCI All-Country World Index dipped 0.2% to the lowest in more than a week. The UK’s FTSE 100 Index fell 0.3%, the largest fall in more than a week. Germany’s DAX Index rose 0.1% to the highest in more than 10 weeks. The MSCI Emerging Market Index decreased 0.8% to the lowest in more than two weeks. Futures on the S&P 500 Index dipped 0.2% on the biggest decrease in almost three weeks.

Currencies: The Bloomberg Dollar Spot Index rose 0.2%. The euro dipped 0.3% to $1.1913. The British pound climbed 0.2% to $1.353.

Bonds: The yield on 10-year treasuries fell less than one basis point to 2.25%. Germany’s 10-year yield declined two basis points to 0.43%. Britain’s 10-year yield fell less than one basis point to 1.35%.

Commodities: Gold declined 0.4% to $1,292.78 an ounce. West Texas Intermediate crude fell 0.4% to $50.46 a barrel.

Asia: Japan’s Topix index advanced 0.5% at the close in Tokyo. Australia’s S&P/ASX 200 Index ended virtually unchanged and South Korea’s Kospi index slid 0.4%. The Hang Seng Index in Hong Kong fell 1.4%. The Japanese yen declined 0.1% to 112.15 per dollar.