Germany election: Markets soothed by Angela Merkel win

Survey suggests service sector growth beating forecasts

Angela Merkel’s historic third election victory and another strong performance from Germany’s economy reassured markets today as the single currency bloc puts a lengthy recession behind it.

Merkel will rule in coalition again after falling short of an overall majority in Sunday’s poll, although her current partners were wiped out. But equities and currency markets were largely unmoved on the result, which commentators said was unlikely to herald a sea-change in European politics. “German politics are not normally the major topic on trading floors across London but following Angela Merkel’s impressive victory — the best since Helmut Kohl’s in 1990 — the short-term stability of the German economy looks assured,” IG’s Alastair McCaig said.

The victory comes as debt-ridden Greece edges towards a third bailout unlikely to be popular with German voters.

John Hardy, Saxo Bank’s head of currency strategy, said: “Merkel is likely to try to continue the approach that has brought her relative success so far, making small concessions here and there, such as a small third bailout in Greece, to stem the risk that any individual crisis triggers a wider contagion. What we won’t see is a new overall vision for Europe.”

Financial data provider Markit’s latest snapshot of manufacturing and services firms meanwhile showed more evidence of the mighty German economic machine driving the strongest month for Europe’s private sector since June 2011. Germany saw new business grow at the fastest rate for two years, while French activity also rose marginally for the first time since February 2012. Markit said there were “growing signs” of eurozone recovery.

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