European shares end lower; German stocks rise on election relief

(Reuters) -Europe’s STOXX 600 index ended lower on Monday as declines in tech stocks offset gains in banks and energy, while German shares hit 10-day highs as the federal election outcome reduced the chances of a left-wing coalition forming a government.

Germany’s blue-chip DAX rose 0.3%, leading gains among regional indexes, while the pan-European STOXX 600 index fell 0.2%.

Germany’s centre-left Social Democrats were set to start trying to form a government after they narrowly won their first national election since 2005, saying they would seek to form a coalition with the Greens and the liberal Free Democrats by Christmas to take over from Angela Merkel’s conservatives.

Investors were relieved that hard-left Linke party fell below the 5% threshold needed to enter parliament.

“The left wing Die Linke party’s poor election showing appears to have ruled out a left wing alliance, and its likely negative impact on German stocks,” according to BlackRock Investment Institute.

“We see the election outcome eventually resulting in a moderate left or right leaning government.”

German real estate company Vonovia, aircraft engine maker MTU Aero Engines and renewables company Siemens Energy were the top gainers on the DAX.

The oil & gas index climbed 2.8% to hit a three-month high, while banks added 2.8%. [O/R]

Oil majors TotalEnergies, Royal Dutch Shell and BP rose between 3.4% and 4.8%, providing the biggest boost to the STOXX 600.

“Concerns over the possibility that tech stocks have been pumped up by easy money brings a potential shift towards pro-cyclical laggard which often rise as yields improve,” said from Joshua Mahony, senior market analyst at IG.

While worries about hawkish central bank policies, fallout from China Evergrande’s financial troubles and inflation have weighed on sentiment, investors are hoping that vaccination will drive a steady global recovery.

The STOXX 600 index has climbed 15.9% so far this year, falling slightly short of 18.3% rise in Wall Street’s S&P 500.

IWG Plc jumped 4.4% to the top of STOXX 600 after Sky News reported that British office rental firm is exploring a multi-billion pound break-up that would involve splitting it into several companies.

Zooplus AG gained 4.3% after Swedish private equity firm EQT AB made an offer to buy the online pet supplies’ retailer for about 3.36 billion euros ($3.94 billion), trumping a 3.29-billion-euro bid from U.S. private equity Hellman & Friedman.

Spain’s Cellnex Telecom slid 4.1% after Citigroup downgraded the stock to “sell”, citing valuation concerns.

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