European shares inch higher as Merkel hangs on to power

2017 09 25T153640Z 1 LYNXNPED8O1F2 RTROPTP 0 MARKETS EUROPE STOCKS 1 - European shares inch higher as Merkel hangs on to power
The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, September 25, 2017. REUTERS/Staff/Remote

September 25, 2017

By Julien Ponthus

LONDON (Reuters) – European shares edged higher in cautious trade on Monday after German Chancellor Angela Merkel secured a fourth term but saw her party weakened by a surge in support for the far-right.

At 1027 GMT (5.27 am ET) both the pan-European STOXX 600 <.STOXX> and euro zone blue chips <.STOXX50E> were 0.1 percent higher – a more moderate reaction than the currency market where the euro took a hit.

European bourses were mixed, with France’s CAC 40 <.FCHI> down 0.1 percent, Germany’s DAX <.GDAXI> up 0.3 percent and Milan <FTMIB> flat.

Financials were the biggest drag on European stocks while healthcare, energy and industrials helped offset those losses.

“We had a small negative surprise”, Lionel Melin, a senior cross asset strategist for Lyxor, said.

Some traders said they were worried the vote might lead to a new coalition government less keen on pushing euro zone integration.

French train maker Alstom <ALSO.PA> rose 1.5 percent to its highest level since March 2013 after confirming on Friday it was in talks with German engineering group Siemens on a possible tie-up.

Switzerland’s ABB <ABBN.S> rose 0.6 percent on its announcement it was buying General Electric’s Industrial solutions unit in a deal worth $2.6 billion.

Shares in ABB have risen around 12 percent so far this year, in line with the broader European industrials index.

Unilever <ULVR.L>, which announced it would buy cosmetics firm Carver Korea for 2.27 billion euros ($2.71 billion), added 0.7 percent.

Unicredit <CRDI.MI> slipped 0.1 percent after its deputy chairman said on Friday that the speculation about his bank wanting to take over Commerzbank <CBKG.DE> was nonsense. The German bank lost 1.2 percent.

Swedish construction firm NCC <NCCb.ST> was the worst performer on the STOXX, falling 7.2 percent, after it said it expected third-quarter operating earnings to come in far below market forecasts.

Politics continued to play spoilsport in Spain where Madrid’s IBEX <.IBEX> lagged its peers, off 0.7 percent.

The mounting political crisis over Catalonia’s campaign for independence, which dragged stocks sharply lower last week, intensified over the weekend. Caixabank <CABK.MC> took the most points off the index, retreating 2.3 percent.

(Reporting by Julien Ponthus, Editing by Vikram Subhedar and Andrew Heavens)

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