German stocks declined for a second day as investors considered the composition of a new government following Angela Merkel’s victory in yesterday’s election.
LEG Immobilien AG, Germany’s second-largest residential landlord by market value, dropped 3 percent amid the prospect of a grand coalition that would see the Social Democrats replacing the liberal Free Democrats as partners of Merkel’s Christian Democratic bloc. Infineon Technologies AG added 1.6 percent after Exane BNP Paribas said the semiconductor maker will benefit from increasing car sales in Germany and Asia.
The DAX Index slipped 0.5 percent to 8,635.29 at the close of trading in Frankfurt. The gauge has still climbed 8.5 percent so far this quarter and is heading for a 13 percent gain this year. The benchmark index rose for a third week last week after the Federal Reserve refrained from reducing its $85 billion of monthly asset purchases. The HDAX Index fell 0.5 percent today.
“Angela Merkel is the clear winner of this election,” Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH, which oversees about $22 billion, wrote in an e-mail before the final results. “Clearer than even the optimists would have expected. However, in a twist of irony, her combined backing has diminished as her coalition partner FDP has not made it into parliament. If she needs a coalition-partner, it will be the SPD.”
Merkel’s Christian Democratic grouping, which includes Bavaria’s Christian Social Union, took 41.5 percent of the vote, compared with 25.7 percent for the SPD, led by Peer Steinbrueck, in yesterday’s election. That still leaves her short of a majority and needing a coalition partner to govern Europe’s biggest economy.
The FDP, which served as the junior partner in Christian and Social Democrat-led governments, won less than the 5 percent needed to enter the Bundestag.
Merkel said today she had “initial contact” with SPD Chairman Sigmar Gabriel. She also allowed for negotiations with the smaller Greens party, which said it was ready to deal for a share of power in Europe’s biggest economy.
“The outcome of the German federal election from our perspective is not as positive as seen by many investors even though Merkel is the clear winner at a first glance,” Christoph Hock, an equity sales trader at Alpha Wertpapierhandels GmbH in Frankfurt, wrote in an e-mail. “The Social Democrats could at any stage blow up a grand coalition in its four-year lifetime, whenever they feel a shift in the political landscape in their favour. A difficult situation, which we believe markets will dislike when giving it a second thought.”
LEG Immobilien slid 3 percent to 43.32 euros. Deutsche Wohnen AG, Germany’s largest residential landlord by market value, slipped 1.5 percent to 13.55 euros. Equinet AG said in a note last week that residential real estate companies could suffer in the event of a grand CDU-SPD coalition, as those parties favor various caps on rent increases.
EON SE and RWE AG, Germany’s largest utilities, retreated 1 percent to 13.38 euros and 0.3 percent to 24.61 euros, respectively. The failure of the FDP party to make it into parliament is negative for utilities as it advocated a reversal in the current policy of subsidizing renewable energy at the expense of traditional carbon generation, Citigroup Inc. wrote in a note.
ThyssenKrupp AG lost 1.9 percent to 17.17 euros. Talks with Cia. Siderurgica Nacional SA over the sale of the German steelmaker’s unit in Brazil may collapse, Reuters reported, without saying where it got the information.
Infineon Technologies gained 1.6 percent to 7.61 euros. The exposure of Europe’s second-biggest semiconductor maker to German and Asian car manufacturers places it well to benefit from rising auto sales over the next three years, according to a research note from Exane.
Separately, Infineon forecast the start of a recovery in the global chip market after two years of stagnation, Boersen-Zeitung reported, citing an interview with Chief Financial Officer Dominik Asam.
The volume of shares changing hands in companies listed on the DAX was 3.4 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.