German election outcome and oils push European markets higher

On Monday German shares reached ten-day highs after the federal election result reduced the chances of a left-wing coalition forming a government, while broader European markets applauded a surge in crude prices that fueled oil stocks.

Germany’s blue-chip DAX gained 0.9%, leading gains among regional indexes, while the pan-European STOXX 600 index rose 0.4%.

Germany’s centre-left Social Democrats were set to start trying to form a government after they closely won their first national election since 2005, saying they would try to form a coalition with the Greens and the liberal Free Democrats in what is labelled as the “traffic light” coalition.

While it might take a while before the new government is formed, investors were pleased that hard-left Linke party fell below the 5% threshold needed to enter parliament.

German real estate company Vonovia, aircraft engine maker MTU Aero Engines and renewables company Siemens Energy were the top performers on the DAX.

The oil & gas index rose 1.8% to reach a three-month high as Brent futures moved for $80 per barrel amid supply concerns.

Oil majors TotalEnergies, Royal Dutch Shell and BP gained between 1.8% and 2.4%, providing the biggest lift to the STOXX 600.

While worries about aggressive central bank policies, effect from China Evergrande’s financial troubles and inflation have weighed on sentiment, investors are hoping that vaccination will drive a steady global recovery.

The STOXX 600 index has climbed 16.5% so far this year, falling slightly short of 18.6% rise in Wall Street’s S&P 500.

Zooplus AG rose 4.2% after Swedish private equity firm EQT AB made an offer to buy the online pet supplies’ retailer for about 3.36 billion euros, surpassing a 3.29-billion-euro bid from U.S. private equity Hellman & Friedman.

Spain’s Cellnex Telecom lost 3% after Citigroup downgraded the stock to “sell”, citing valuation concerns.