Early on Monday, Frankfurt stocks led European markets down. This was because a rise in support for a far-right party in Germany’s local elections and bad economic data from China made investors less optimistic.
Even though Wall Street had a strong day on Friday, the DAX index fell 0.5% at the start of the week when investors heard that the AfD had won the election in Thuringia, an eastern state, with 32.8% of the vote. This was the first time a far-right party had won an election in a German state since the Second World War.
Also, more people voted for the far-left BSW, which made investors worry that the parties that are usually more moderate might have to give in to nationalist policies that are seen as bad for business and the economy.
In one area, the AfD and BSW both agree: Germany shouldn’t help Ukraine by sending them weapons. This caused shares in companies that make weapons, like Rheinmetall RHM -2.58%, to fall.
But as the session went on, the DAX recovered some of its losses. This was because experts said the local elections probably wouldn’t have as much of an effect on national policies as people thought they would.
Marion Muehlberger, a senior economist at Deutsche Bank, said, “Weak election results are likely to speed up the transition into campaign mode for next year’s federal election, making it harder to make real changes until then.”
“The results of Sunday’s regional election are not a sign of what will happen in the next federal election,” she said.
Even so, government bond markets continued to show signs of worry. For example, the 10-year German Bund yield TMBMKDE-10Y 2.335% rose 3.6 basis points to 2.338%, which was the highest level in a month.
Traders were worried about the health of the Chinese economy after a survey over the weekend showed that manufacturing activity fell to its lowest level in six months in August. This made shares of German automakers like Mercedes-Benz MBG -2.36% go down.
The bad mood spread across Europe, with the FTSE 100 UKX -0.09% down 0.2% and the CAC 40 PX1 -0.16% down 0.4% in Paris.
