PARIS (Reuters) – The main European scholarships, which were practically stable at the opening, switched to the red after Friedrich Merz could not obtain, to everyone’s surprise on Tuesday the support of a majority of German deputies to be confirmed in the first ballot in the Chancellery.
Around 9:40 a.m. GMT, the Dax in Frankfurt, which nibbled 0.04% at the opening, is now down 1.9%.
In Paris, the CAC 40 lost 0.85%, while in London, the FTSE 100, fell 0.28%, against an initial gain of 0.35%. The Eurostoxx 50 index reflected 1.13%, the FTSEURofirst 300 of 0.92%and the Stoxx 600 of 0.79%.
In the aftermath of the signing of a coalition contract between the conservative block CDU/CSU and the social democrats of the outgoing Chancellor Olaf Scholz, Friedrich Merz did not succeed in obtaining the majority to become chancellor, only 310 deputies who voted in its favor in the first round, is six less than the required majority.
This could accentuate the political crisis in Germany while the Bundestag now has 14 days to elect Friedrich Merz or any other Chancellery candidate.
On the stock market, the European Defense sector, the most likely to benefit from the investment plan provided by Friedrich Merz with the historic reform of the debt brake, gives up almost 2% and displays one of the largest withdrawal of the Stoxx 600 index.
-On the bond market, the yield of the German Bund at ten years is up more than two base points, to 2.545%, while the two years appears at 1.768%.
“It is unprecedented and it delays the transition from power,” write Societe Generale analysts in a note.
“The failure of the vote clearly shows that the budget turnaround is not shared by all within the CDU”, underlines Carsten Brzeski, director of research in macroeconomics at ING.
For him, the government must still convince its own supporters of its ability to keep its commitments to reassure the markets.
“This is an important negative point. He (Merz) is still likely to be elected, but it shows that the coalition is not united, which could weaken its ability to conduct policies,” notes Holger Schmieding, chief economist at Berenberg.
(Written by Claude Chendjou, with Sukriti Gupta and the Reuters markets team, edited by Blandine Hénault)
