Category: Markets / Finance / January 21, 2013 10:08 AM EST
Germany's DAX index was left almost unchanged the day after Chancellor Angela Merkel's ruling coalition suffered a defeat in a key state election.
Her Christian Democrats (CDU), led by rising star David McAllister, had convinced themselves over the past week that they were on the verge of a stunning come-from-behind victory in Lower Saxony, a major agricultural and industrial region that is Germany's closest approximation to a swing state.
But on Sunday (January 20) , they came up agonisingly short, losing power to the centre-left Social Democrats (SPD) and Greens, who together garnered just one more seat in the state assembly than the centre-right.
The defeat is a bitter one for Merkel, even if she remains a strong favourite to win a third term in a federal election eight months from now.
The DAX was up 0.35 percent at 7728 at 0957GMT on Monday (January 21) with traders saying they didn't expect a backlash from the results.
"The election in Lower Saxony is not having a large effect on the markets. Red-Green now has a majority in the Bundesrat (upper house of parliament) but this only means that they also carry the responsibility and this will most certainly mean that the European peace movement, by this I mean the stabilisation of the euro zone, will carry on in the Bundesrat," Robert Halver from Baader Bank told Reuters TV in Frankfurt.
Halver also remained optimistic about the new favourite to take over the head of the euro zone
Jeroen Dijsselbloem had been finance minister of the Netherlands barely six weeks when his name was first floated as a possible head for the top euro zone decision-making body.
For a first-time minister previously best known as a specialist on agriculture and education, becoming the favourite to succeed the long-serving Jean-Claude Juncker as head of the Eurogroup of finance ministers is the latest stage in a dizzying rise.
But Dijsselbloem, 46, known in the 2000s as a radical leftist, has impressed in Brussels with a manner at once conciliatory and determined, and with his austere personal style.
He is widely expected to be confirmed in the job on Monday when finance ministers of the 17 countries sharing the euro gather to choose their new helmsman, after receiving the backing of several governments and that of Juncker himself.
"Juncker's successor, the Dutch finance minister, is really the same as Mr Juncker, a supporter of stability, however today stability means that the euro zone has to be stabilised using very unstable measures. I mean the new head of the euro group is the guarantee that the euro zone does not collapse," Halver said.