Markets relieved by German elections as key industries face uncertainty

Germany Electoral result delivered a shake of optimism to dazzled markets at the beginning of the week, although the question of whether the new government can deliver a greater promised public spending and restart the economy He continues to hang on the besieged important industries of the country.

Frankfurt Dax The index won 0.6% on Monday, surpassing a United Kingdom plane Ftse 100 and 0.78% loss for France Cac 40While the euro pushed higher against the US dollar and the British pound and the costs of German loans changed little.

Sunday’s vote offered a victory for the conservative alliance of the Christian Democratic Union (CDU) and the Christian Social Union (CSU). That has been configured CDU-CSU Friedrich Merz candidate -A politician and pro-negocio politician that serves in the Germans of Ey and Deutsche Börse, as almost true to assume as the next chancellor.

However, there is some uncertainty, with a period of coalition conversations ahead and a future in which the support of the smallest parties will be needed to promulgate promised policies, including the reform of Germany. Contentious rule of “debt brake”.

“I think what the market is seeing now is some stability, at least we know who won the elections, we know who is claiming it, and then we know who will be the coalition from here. So I think the market is taking that as A great positive, “Michael Field, the main capital strategist in Morningstar, said on Monday” European Squawk Box “of CNBC.

A worst market result could have seen that the CDU does not reach the necessary level to begin to form a coalition, which caused “a few disorderly months of matches that fight and there is no clarity for business,” Field said.

The result is positive for the German economy because a bipartisan “great coalition” between conservatives and social democrats (SPD) now seems like a probable result, a situation that accelerated decision making, said Danske Bank analysts in a note.

Whether it is a coalition of two or three parts that brings a smaller player like the green, with Merz that the government ruled out along with the second place of extreme right, the main parts are aligned in the policies that include reducing Energy prices and invest more in infrastructure, Morningstar’s Field told CNBC, which would see “positive that are presented for companies in the future.”

According to Field, that could give a boost to the sectors, including the German car industry, the sector once very crazy which has been mistreated by the Competition of Electric Vehicles of China, the weak domestic demand, threats and tariff regulation of the United States.

“The sector is so poorly beaten … Our position is that much is needed to change that impulse and change it slightly in the positive direction, and a new government with a mandate to really reduce energy prices, trying to improve the Competitiveness in the economy, any little of giving there could really give that sector the reinforcement that needs bad at this stage, “Field said.

The public service sector largely overlooks is another area that can benefit if the government eliminates policies, such as energy pricing limits and consumer energy taxes that have limited markets on the market, the field continues.

Siemens energy President Joe Kaeser told CNBC on Monday that the government needed a long -term agenda to restructure Germany in the next five years. Such agenda would need to focus on the economy, infrastructure, energy, education, innovation, the restructuring of the pension system and “recover government control and government reforms.”

Meanwhile, Arnd Franz, CEO of the car manufacturer, told CNBC that the manufacturing sector needed urgent action on taxes, energy costs and flexibility of the labor market.

Citi analysts emphasized in a Monday note that “the panorama of politics after the election will depend on the form of the coalition government yet to be formed.”

Highlighting the impact of the market that the smallest parties could have, they said that the participation of green Mandates of heat pump modifications. .

Citi analysts also said they saw a limited risk (in the medium term) for the German wind auction regime “, citing the CDU platform that it is time to” develop networks, storage facilities and all renewable energies ” .

“This would seem not to involve important steps aimed at hindering the development of wind energy,” according to CITI, which supports actions such as Nordex and VestasThey wrote.

However, the remaining key questions for markets include whether the government may return the economy to growthReconstructs the weak feeling of businesses and consumers, and increases fiscal spending by eliminating the rules enshrined in the Constitution that limits how much debt the government can assume. The last point has focused on a broader approach in recent weeks as European nations Discuss increase your defense expense In response to the Russian-Ukraine War and Tensions with the United States

“The key result from a market perspective … is the fact that the three establishment parties (CDU/CSU, SPD and the Greens) do not claim two thirds of the necessary seats to change the Constitution”, investigation of Rabobank economy The team said Monday.

Therefore, the approved reform does not have a clear route, with the elimination of debt brakes from AFD, and left -wing Die Linke is open to it, but disagree with the SPD, and opposed to assemble Ukraine.

“The conclusion, then, is that yesterday’s election result has not resulted in a clear path to the Constitution that is changed to allow a change in passage in government spending,” Rabobank said.

They added that the German and regional growth perspective remains “decidedly bleak in the absence of a dramatic fiscal change.”