The German stock market experienced an initial market scare this morning after the leader of the German Christian Democrats, Friedrich Merz, failed to be elected chancellor of his country in the first vote by not obtaining the necessary support. It was a surprise for investors as well, as it was assumed that his conservative coalition had enough support to achieve it without major complications. It is an unprecedented situation in Germany since all previous chancellors had been elected in the first round.
Consequently, after the news broke, the German DAX Xetra started to plummet more strongly from 10 in the morning until reaching a 2% drop an hour and a half later. At this time, the market is recovering from the mini-shock caused by what happened in the Bundestag and is now down by less than 1%, above the rest of the European stock markets with much more moderate declines, such as the Ibex 35 in Spain or the CAC 40 in France, which is down by 0.4% at midday.
Among the companies most affected by the drops are the automaker Porsche, the chemical company BASF, and the chip manufacturer Infineon, which are down by more than 2.5%. Other giants like Siemens, Daimler, or SAP are experiencing drops of 2%.
In the bond market, investors are currently selling off German bonds. The ten-year bond yield is rising to 2.53%.
The issue is that Germany has never faced such uncertainty before. A chancellor candidate had never lost in the first vote since the end of the war. Merz needed a majority of 316 out of 630 votes in a secret ballot. He only received 310 votes, well below the 328 seats his coalition holds.
According to EFE news agency, the leadership of the Christian Democratic Union (CDU) still hopes to finalize his election this Tuesday after the unexpected failure of Friedrich Merz's election as chancellor in the Lower House. "I hope that tonight we will have a chancellor named Friedrich Merz," said the CDU's general secretary, Carsten Linnemann, in statements to the Phoenix channel.