Talking Points:
- Political horse trading was on market minds Monday
- New governing coalitions must form in New Zealand and Germany following weekend elections
- Japan may yet get a snap election of its own
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Asian stocks were mixed Monday as investors kicked over the results of weekend elections in Germany and New Zealand.
Japan’s Nikkei 225 was up 0.4%, with the Kospi down by a similar amount. The ASX 200 inched ahead but Chinese markets were down across the board.
German Chancellor Angela Merkel’s Christian Democratic Union remained the biggest single voice in the German Parliament, but it did more poorly than expected and must now form another coalition government. As importantly, the right-wing euro-skeptic Alternative For Deutschland did very well and, although it is unlikely to take part in any ruling coalition, will probably change the tone of the Parliament.
The Euro initially slipped on this news but has made back some of its losses. The New Zealand Dollar was also lower on news that the ruling National Party had won the most seats but fallen short of an absolute majority. Coalition building will be the order of the day in Wellington, a process which could take weeks leaving the currency hostage to headlines.
Politics were to the fore in Japan where Prime Minister Shinzo Abe is reportedly expected to declare a snap election for next month. The Yen was down against the Dollar, affected little by a speech from Bank of Japan Governor Kuroda in which he reiterated support for ultra-loose monetary policy. Newswires reported that Abe’s government is to compile a new JPY2 trillion (US$18 billion) stimulus package.
Gold prices slipped as the US Dollar firms and markets looked away from North Korea- all-but certain though they are to return their gaze there. Oil prices were steady as investors looked with hope to reports that the market could rebalance away from its now-ancient supply glut.
The rest of the session will bring Germany’s Ifo survey and European Central Bank President Mario Draghi who is due to speak in Brussels. The New York Fed’s William Dudley is on the slate too but his topic, workforce development, does not obviously suggest a talk replete with monetary pointers.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
