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European markets close slightly higher after German election result; euro falls; Brexit talks resume

  • The euro has been under pressure since the start of the Asian session. The currency was trading at $1.1852 at 4:50 pm London time, down by 0.84 percent
  • Tullow Oil jumped 7 percent on expectations that it will resume drilling in Ghana
  • Brexit negotiators resumed talks Monday in Brussels after U.K. Prime Minister Theresa May asked for a transition period after March 29, 2019
  • Overall, market sentiment was dominated by the outcome of the German vote

European stocks closed higher Monday as investors digested election results out of Germany, where the nationalist Alternative for Germany (AfD) won parliamentary seats for the first time.

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The pan-European Stoxx 600 was 0.18 percent higher with most sectors and major bourses in positive territory. Banking stocks were the worst-performers. Italy's Banco BPM saw its shares dip more than 2 percent, while Spanish lender Caixabank was down 3.79 percent. Overall, market sentiment was dominated by the outcome of the German vote.

Looking at individual stocks, Tullow Oil led the European benchmark. Africa's biggest independent oil producer said Monday it would resume drilling at several Ghanaian oilfields after the resolution of a maritime border dispute. The news sent shares of the firm up by 7 percent.

Rail transport company Alstom was also among gainers in the final hour of trading. German industrial group Siemens was rumored to be interested in picking the firm for a rail merger rather than Canadian rival Bombardier. Alstom's shares were up 1.27 percent, while Bombardier's tumbled more than 5 percent.

Shares of Swedish construction firm NCC fell more than 8 percent after it said it expected third-quarter operating profit to be well below market forecasts. The company said profits were being impacted heavily by an infrastructure project write-down in Norway.

On Wall Street, stocks opened lower after populists gained ground in a Sunday election in Germany and investors weighed the likelihood of another interest rate hike this year.

Euro under pressure

Chancellor Angela Merkel won a fourth term in office on Sunday, but she is due to face tough political negotiations to form a new governing coalition. At the same time, she will also have to deal with a more fractured parliament after the anti-immigration; far-right AfD party beat expectations and became the first far-right party to join the Bundestag in more than half a century.

The euro was under pressure since the start of the Asian session. The currency was trading at $1.1852 at 4:50 pm London time, down by 0.84 percent.

Also in the corporate world, Lufthansa is prepared to pay 200 million ($238.67 million) euros to buy assets from the insolvent Air Berlin, according to Reuters. Shares of the airline were up 0.5 percent on the news.

In other news, ABB is to buy General Electric's Industrial Solutions business for $2.6 billion.

Brexit talks resume; ECB 'more confident' inflation will rise

Meanwhile, Brexit negotiators are set to resume talks Monday in Brussels after U.K. Prime Minister Theresa May asked for a transition period after March 29, 2019 – when the U.K. officially leaves the European Union. However, during a speech in Florence last Friday, May failed to outline what the "new relationship" between the EU and the U.K. could look like. Without firm offers, the EU cannot negotiate a trade deal, let alone a transition deal, Michel Barnier, the EU's chief negotiator said.

In a speech, European Central Bank President Mario Draghi said the bank was becoming "more confident" that inflation will rise to the central bank's target.