By Nikhil Sharma
(Reuters) -German stocks were the standout gainer in Europe on Monday as Friedrich Merz-led opposition conservatives won the national election as expected.
The pan-European STOXX 600 index climbed 0.2% to 0930 GMT, with real estate and utility stocks leading the gains with a rise of more than 1.5% each.
Germany’s blue-chip index jumped 0.8%, boosted by arms makers, while the mid-cap index surged 2.3% and small caps advanced 1.1%.
Defence stocks Rheinmetall, Hensoldt and Renk advanced between 3.3% and 4.3% on prospects of higher military spending by the incoming administration in Berlin. The European aerospace and defence index rose 0.9%.
Merz was set to become Germany’s next chancellor after his opposition conservatives won the national election on Sunday, though he faces complex and lengthy coalition negotiations after the far-right Alternative for Germany (AfD) surged to a historic second place in a fractured vote.
Protracted coalition talks could delay urgently needed policies, including budget reforms and spending increases, to revive Europe’s largest economy after two consecutive years of contractions.
“The thing that most worries investors is how much time it would take to form a coalition,” said Lale Akoner, lead global market analyst at eToro.
“The market is still digesting news and trying to understand whether the pro-growth policies could be implemented by the new coalition.”
The AfD along with the Left party jointly secured one third of seats in the new parliament that is required to block changes to the constitution, including a loosening of the debt brake.
The euro pared some early gains to last trade 0.2% higher at $1.0478.
Germany’s 10-year bond yield, which serves as the benchmark for the wider euro zone, was last up 1 basis point at 2.465%.
Countering the gains on STOXX, engineering company Siemens Energy fell 3.1% and electrical equipment maker Schneider Electric tumbled 10.2%.
Basic resources lost 0.7%, weighed down by weaker metal prices on fears of a major global trade war over U.S. President Donald Trump’s threats to raise tariffs.
Shares of Dutch technology investor Prosus slid 7%, dragging the technology index 0.5% lower.
Just Eat Takeaway.com rose more than 52% and was set for its best day on record, after Prosus agreed to buy Europe’s biggest meal delivery firm for 4.1 billion euros.
B&M fell 7.2% to trade at the bottom of STOXX after the discount retailer cut its profit forecast blaming uncertain economic conditions, and said CEO Alex Russo would retire after two-and-a-half years at the helm.
(Reporting by Nikhil Sharma; Editing by Eileen Soreng and Subhranshu Sahu)
