German Markets Breathe Sigh Of Relief After Election Results: 2 ETFs To Watch

The German federal election held on Sunday resulted in a victory for the conservative CDU/CSU alliance led by Friedrich Merz, who secured 28.5% of the vote. Germany's bluechip DAX index rallied as much as 0.8% on Monday before paring some of its gains, as investors digested the election results. 

What To Know: Investors reacted positively to the election results which came in as anticipated. 

“There is an immediate relief that there were no big nasty surprises in the election outcome, and a centrist-leaning government will persist and could even pivot more towards business and investment friendly policies,” said Charu Chanana, Saxo’s chief investment strategist, per Reuters. 

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The conservatives will most likely form a two-party coalition with the Social Democrats, which could lead to easier policymaking than under the outgoing three-party coalition. 

The euro briefly touched one-month highs on Monday, but have since retreated as investors see complications ahead. 

Negotiations needed to form a coalition could be extended and the far-right AfD and the Left Party jointly secured a third of the seats, which could lead to challenges to potential reforms to the debt brake and other policies.

“Participants are hence paring back their expectations of significant fiscal stimulus being delivered in short order,” Pepperstone strategist Michael Brown said, per Reuters. 

ETFs To Watch: The Global X DAX Germany ETF DAX, tracking Germany's DAX index, rose 1.01% and the iShares MSCI Germany Index Fund EWG was up 1.34% in premarket trading Monday. 

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