European stocks set to rally as investors digest German election results

  • The German DAX is set to rally by 107 points to 15,527, while the U.K.'s FTSE 100 is set to climb by 59 points to 709, and France's CAC 40 is set to rise by 43 points to 6,675, according to IG.
  • In Germany, preliminary results on Monday morning showed the center-left Social Democratic Party gaining the largest share of the vote with 25.8%.
  • Angela Merkel's right-leaning bloc of the Christian Democratic Union and Christian Social Union was seen with 24.1% of the vote. 

LONDON — European stocks are set to rise on Monday, with German election results seen eliminating a key market risk for investors in the region.

The German DAX is set to rally by 107 points to 15,527, while the U.K.'s FTSE 100 is set to climb by 59 points to 709, and France's CAC 40 is set to rise by 43 points to 6,675, according to IG.

In Germany, preliminary results on Monday morning showed the center-left Social Democratic Party gaining the largest share of the vote with 25.8%. Angela Merkel's right-leaning bloc of the Christian Democratic Union and Christian Social Union was seen with 24.1% of the vote. 

But coalition negotiations, which could begin on Monday, are likely to take weeks or even months.

Market watchers noted that the poor showing for Germany's far-left Die Linke party, meant that a fully left-leaning coalition in the Bundestag was now out of the question.

Holger Schmieding, chief economist at Berenberg Bank, said in a research note that a pact between the SPD, Die Linke and the Greens could have "impaired trend growth through tax hikes, reform reversals and excessive regulations."

Elsewhere on Monday, European Central Bank President Christine Lagarde will deliver a statement to a European Parliament committee, and the U.K.'s opposition Labour party will resume its annual conference in Brighton.

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There are no major earnings reports or economic data releases on Monday.

U.K. energy stocks like BP will be closely watched, after panic buying over the weekend due to a truck driver shortage that left many gas stations in Britain without any fuel.

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