Merz won chancellor vote after initial volatility, stabilizing markets

From Morningstar: 2025-05-06 12:35:00

German stock and bond markets were volatile as Friedrich Merz failed to secure a majority in the first round to become Germany’s next chancellor. However, he later won with 325 votes in the Bundestag, stabilizing the markets. The DAX index dropped by 1%, then rebounded after the successful second vote.

Sectors reliant on government contracts and infrastructure spending were affected by the political impasse. Defense-related stocks like Rheinmetall, Hensoldt, and RENK experienced declines, then bounced back. German bond yields were initially lower due to uncertainty, but later recovered. The euro remained steady against the US-dollar at $1.13.

Despite the hurdle, Merz is expected to push forward with his policy agenda, including a public investment plan. However, questions arise about the unity of his coalition and the discipline of his base. Some SPD members may oppose welfare reform, while conservatives may object to debt brake loosening, creating potential friction.



Read more at Morningstar: Merz and Markets: What the Chancellor Vote Means…