This week: Angela Merkel wins the German elections amid the rise of her country’s far-right party, and a donkey has an appetite for destruction - of sports cars.
Signs that populism is on the wane have been warmly welcomed by investors in recent months. European stock markets and the euro currency have both risen since far-right politicians failed to make gains in the Dutch and French elections earlier this year.
However, the German elections last weekend proved that parties on the extreme right have not gone away. The Alternative fur Deutschland party (AfD) became the first openly nationalist party to enter the Bundestag since the Second World War, gaining 13% of the vote.
Chancellor Angela Merkel secured a fourth term in office, but will now have to form a three-way coalition government, weakening her own party’s hold on power. Concerns this could affect the stability of German policymaking caused the euro to fall against both the dollar and sterling over the week.
Lucy O’Carroll, Chief Economist at Aberdeen Standard Investments, commented: “This is a fairly hollow victory for Angela Merkel, who will have to negotiate a more complex coalition agreement against the backdrop of the AfD breaking through into the mainstream. Anyone who might have thought that European political risk had disappeared will have had a rude awakening.”
The result didn’t overly concern equity investors though; the FTSE World Europe Ex UK Index finished the week up by 0.46%. In the UK, the FTSE 100 Index rose 0.17%, while in the U.S., the S&P 500 Index finished 0.31% higher.
Concerns were raised about the job security of the 4,000 employees at the Bombardier aircraft factory in Belfast after the U.S. Department of Commerce opted to impose a 220% tariff on the Canadian company’s C-Series jet. The move was a response to concerns raised by rival aircraft manufacturer Boeing, which complained about subsidies received by Bombardier from the Canadian and UK governments.
The case has sparked fears of a trade war between the U.S. and Canada, and brings the issue of protectionism to the forefront at a time when the U.S. is attempting to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico.
Christmas is canceled
Michael O’Leary has moved to underpin his status as Europe’s least-loved businessman (in what is surely a fiercely contested category). The abrasive Ryanair boss announced this week that 34 additional routes would not operate for five months. The move affects a further 18,000 flights on top of those already canceled, and sparked calls among consumer groups to boycott the airline. A spokesman for consumer magazine Which? described the situation as a “complete and utter shambles,” adding that “Ryanair has effectively canceled Christmas for some of its passengers.”
Shares in the airline had staged a minor recovery before the announcement, but subsequently fell another 3%. The value of the company now stands nearly 15% lower than before the current crisis.
The owner of Vitus, a donkey in Vogelsberg, Germany was in a mulish mood after a court ordered him to pony up €6,000 (US$7095) for damage his four-legged felon caused to a bright orange sports car. Markus Zahn parked his €300,000 (US$354,800) McLaren Spider in a car park bordering a paddock, without realizing the car was within chomping range of Vitus. The police apparently did little to dissuade Vitus’ owner that the law is an ass, with their suggestion that the donkey may have confused the car for a carrot.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security.
Indexes are unmanaged and are included for illustrative purposes only. You cannot invest directly in an index.