Asia slides on China fears; euro, kiwi slip on political uncertainties

TOKYO — The euro slipped on Monday after German Chancellor Angela Merkel won a fourth term but faced a fractured parliament as support for the far-right surged, while Asian shares pulled back, weighed by concerns about China’s economy.

The New Zealand dollar also took a hit as the ruling National Party won the largest number of votes in a weekend election but failed to secure a ruling majority, with a protracted period of coalition building now a possibility.

Spreadbetters expected European stocks to start slightly lower, forecasting Britain’s FTSE to open down 0.10%, Germany’s DAX to open little changed and France’s CAC to start 0.20% lower.

The euro slid 0.20% to $1.1933, putting more distance between a two- and- a- half- year high of $1.2092 reached on Sept. 8, when a European Central Bank (ECB) policy meeting left currency bulls optimistic the ECB would begin tapering its big stimulus program.

MSCI’s broadest index of Asia- Pacific shares outside Japan handed back earlier modest gains and was last down 0.60%.

Two years after Ms. Merkel left German borders open to more than one million migrants, the anti-immigration Alternative for Germany stunned the establishment by becoming the first farright party to enter parliament in more than half a century.

Merkel now turns to the task of sounding out new partners to build a coalition government after her current Social Democrat coalition partner said it would go into opposition.

“The market reacted by selling the euro on the possibility of Merkel running into difficulties in forging a coalition. The euro, however, was already losing support from the European Central Bank’s monetary policy theme and appeared to be on its way lower,” said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.

“The election outcome in Germany showed the country was no longer a special presence in Europe amid growing support for populism and the far right.”

In New Zealand, the kiwi, the world 11th most-traded currency, was down 1% at $ 0.7264 and headed for its biggest intraday percentage loss since May.

It was at a one- and- a- halfmonth high of $0.7435 as recently as Sept. 20, when speculation for a comfortable ruling party win had boosted the currency. “While there are a few different scenarios and some potentially testy issues to negotiate, ultimately the political landscape appears as though it will remain relatively centralist and we are reasonably agnostic on what it all means,” ANZ economists wrote.

Hong Kong’ s Hang Seng was down 1% and Shanghai slipped 0.40% after a number of Chinese cities rolled out new measures to cool housing prices.

South Korea’ s KOS - PI shed 0.40% while Japan’s Nikkei bucked the trend and rose 0.50% thanks to the yen’s weakening against the dollar.

The S& P 500 and Nasdaq closed slightly higher on Friday as worries about the Graham-Cassidy proposal to reform US health insurance eased and investors shrugged off concerns about North Korea.