In the wake of the political statemate in Germany, shares on the Frankfurt exchange fell, but the rest of Europe’s stock markets were mixed and mostly unchanged on the day.
Indeed Britain’s leading share index closed at a new four-year high. The DAX index dropped to a two-week low, recovered a bit, then declined again and ended the day down 1.2%. The Chief Economist at Deutsche Bank, Norbert Walter, believes leading German shares will suffer a set-back, due to the uncertainty. He said: “My guess is the DAX – which reflects international companies – will not be dramatically influenced. The DAX not only avoided being affected by international developments over the last few months, but it even outperformed other markets. That outperformance was based on the idea of Germany becoming more reform-oriented, starting this Autumn. That is clearly not going to happen now, which is why the DAX will perform less well than other international markets. So there is a set-back for the DAX.” The euro also took a hit. It slipped to a seven-week low against the dollar, falling more than 1% and one analyst predicted it could fall to below $1.19 in the next couple of weeks. But there were other factors at work, over and above the inconclusive German election outcome. Traders were also looking to a 0.25% US interest rate rise expected from the Federal Reserve on Tuesday.