Given the uncertainties surrounding the Turkish presidential election and the dispute over raising the US debt ceiling, European investors have remained cautious at the start of the new week. The Dax and EuroStoxx50 each advanced by 0.2 percent to 15,939 and 4327 points respectively by midday on Monday. Meanwhile, Turkish President Tayyip Erdogan's surprisingly strong performance in the first round of elections sent the Istanbul stock exchange plummeting and weighed on Turkish bank shares in particular. Polls before the election had put opposition leader Kemal Kilicdaroglu ahead.
After counting almost all the votes, Erdogan is just ahead of his challenger Kilicdaroglu. However, neither of the two candidates was able to rally an absolute majority behind them in the first round, so that there will be a run-off election in two weeks. "This is a bigger disappointment for investors who were hoping for a victory for opposition candidate Kilicdaroglu and a return to the orthodox economic policies he promised," said Hasnain Malik, an analyst at analyst firm Tellimer. In the parliamentary elections, Erdogan's AK Party is clearly ahead of the opposition alliance. Even if Kilicdaroglu prevails in the second round of voting, he would not have a majority in parliament.
After a price slump of up to 6.7 percent and a temporary interruption of trading, the Turkish benchmark index limited the losses in the course of trading to 2.5 percent. On the other hand, bank stocks in Turkey remained under pressure; the industry index rushed down by around nine percent.
The prospect of a run-off election for the presidency in Turkey also dragged down the shares of Spanish bank BBVA. The bank lost almost five percent in Madrid, making it the biggest burden on the Spanish blue-chip index. The reason for the decline was the "close elections" in Turkey, a trader said. BBVA has an 86 percent stake in Turkey's Garanti Bank, which slumped by ten percent in Istanbul.
The general uncertainty caused investors to reach for gold. The price of the precious metal rose by as much as 0.5 percent to 2021 dollars per troy ounce. In order to avoid a US default, US President Joe Biden plans to meet with leading representatives of Congress on Tuesday for talks on raising the debt ceiling.
Investors, on the other hand, sold bonds. In return, the yield on ten-year German government bonds rose by four basis points to 2.307 percent. Rising inflation expectations led investors to bet on further interest rate hikes.
Central banks are worried about the impact of inflation, such as higher wage demands, said Jens Peter Sørensen, chief analyst at Danske Bank. "Friday's U.S. inflation expectations data was pretty high." The European Central Bank (ECB) may have to raise interest rates for longer than originally expected in order to meet the
Among the individual stocks, Siemens Energy worked its way to the top of the Dax after initial losses with a price increase of up to four percent. The power technology group delivered better-than-expected results in the second fiscal quarter with a strong performance in its gas business, a trader said. "Still, the company has had to become more cautious due to the ongoing challenges at Gamesa." The Group now expects the earnings margin before special items in the 2023 financial year to be at the lower end of the forecast range of one to three percent due to the weak performance at the Spanish subsidiary.
After surprisingly strong figures, investors turned to AXA. The insurance group's shares rose by up to 3.2 percent in Paris, making them among the biggest winners. Analysts pointed to positive surprises in the solvency ratio.