Global shares tread water after German election, Fed focus returns

Mon Sep 23, 2013 8:26am EDT
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By Marc Jones

LONDON (Reuters) - Shares and the euro trod water on Monday as an election triumph for Angela Merkel and upbeat euro zone and Chinese data helped balance renewed concerns about the Federal Reserve's policy stance.

Merkel's resounding win in Sunday's German elections, seen as an endorsement of her steady leadership during the euro zone crisis, was followed by forward-looking euro zone and Chinese PMI data both showing further signs of a pick-up.

Markit's September euro zone Flash Composite Purchasing Managers' Index (PMI) jumped to 52.1 from last month's 51.5, its highest since June 2011 and beating expectations for 51.9 as new orders hit their fastest pace in over two years.

Stock markets struggled for direction, however, put off by Friday's comments from a top Fed policymaker who hinted the U.S. central bank may not wait too much longer to phase out its huge stimulus program. The Fed surprised markets by not starting the process this month.

European shares on the FTSEurofirst 300 .FTEU3 were little changed at 1,261.75 by midday, with a quiet start to the week expected on Wall Street.N after some sharp losses on Friday. World .MIWD00000PUS and European stocks hit a five-year high last week.

Merkel's victory gave the euro only the briefest of lifts, as she will still need a new coalition partner to rule, a deal that could take around a month to carve out.

But Nick Beecroft, chairman and senior market analyst for Saxo Bank capital markets, said Merkel's election win was "a ringing endorsement" for efforts to preserve the euro.

"The positive thing for the euro is that it is 99 percent certain we will have a grand coalition that will be able to change the (German) constitution if needed to allow euro bonds.   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett