Summary:

• Merkel wins election in Germany, however, her party performs worse than expected and the outcome may weigh on DAX (DE30 on xStation5)
• The NZ National Party fell short of the majority – it puts pressure on NZD
• Tensions between the US and North Korea remain high, as the latter one threatened with a preemptively nuclear strike, markets remain calm though

It was a very busy weekend. There were elections in New Zealand (Saturday) and in Germany (Sunday). In both cases, the final results were worse for currently ruling parties which have put a bit pressures respectively on NZD and EUR. However, now investors should prepare for a few weeks of talks until the new coalition in both countries will be formed. Moreover, North Korea threatened the US with the preemptive strike, if needed but it didn’t spook investors.

Let’s start with Germany. The Merkel’s CDU/CSU won the elections although its result of 33% was worse than had been expected. Another mainstream party – SPD – gained only 20,5% of votes, which is the lowest outcome after the World War II. The party leader, Maritn Schulz, said that the SPD would form a strong opposition to the next government. It means that Merkel will likely constitute a so-called Jamaica coalition with Free Democrats (FDP) and Greens. It may bode ill somewhat for DAX (DE30) as the Greens threatens to weigh on stocks in the auto sector – the party will probably pursue diesel-emissions scandal. It’s also worth mentioning that the third result was achieved by AFD – the anti-immigration party. Nevertheless, Germany is set to continue its current course in Europe, which may ensure investors and help the common currency.

 Merkel is likely to form a coalition with FDP and Greens – this may put pressure on DAX today. Bloomberg

In New Zealand, the currently ruling National  Party fell short of the majority by 3 mandates. Prime Minister Bill English has claimed a mandate to form the next government, although opposition leader Jacinda Ardern refuses to concede defeat. It all depends on New Zealand First Party. Markets favor current government as it managed to achieve the budget surplus and boost growth, so the results spurred some nervousness and pushed NZD a bit lower at the opening. About 380 thousands overseas ballots, are yet to be counted. They may tip the balance to either side.

 National Party fell short the majority but it’s still looking for maintaining its grip on power. Source: Bloomberg

Finally, the tensions between US and North Korea remain high, as the latter one threatened with a preventive nuclear strike. In response to these comments, the US Air Force bombers flew over international waters east of North Korea. Nevertheless, the military intervention in Korean Peninsula is still relatively unlikely, thus markets remained calm.US and North Korea remain high, as the latter one threatened with a preventive nuclear strike. In response to these comments, the US Air Force bombers flew over international waters east of North Korea. Nevertheless, the military intervention in Korean Peninsula is still relatively unlikely, thus markets remained calm.

 NZDUSD opened lower as the National Party lost the majority, although bulls have managed to defend 0,7248  handle, which may lead to further rebound. Source: xStation5