European share benchmarks drifted lower in early trading Tuesday as Germany’s president prepared to meet with party leaders hoping to broker a new government. The weakness in Europe followed an upbeat day in Asia, where Hong Kong’s Hang Seng index had its biggest gain in nearly two months.
KEEPING SCORE: France’s CAC 40 slipped 0.1 percent to 5,335.32 in early trading, while Germany’s DAX was down 0.1 percent at 13,044.78. Britain’s FTSE 100 lost 0.1 percent to 7,380.53. U.S. shares were set to drift lower with Dow futures down less than 0.1 percent at 23,386. S&P 500 futures lost 0.1 percent to 2,580.40.
GERMANY: German President Frank-Walter Steinmeier was to meet with party leaders after talks to form a new government between Chancellor Angela Merkel’s conservative bloc the left-leaning Greens and pro-business Free Democrats broke down earlier this week. Barring a compromise, a minority government or new elections are the only options.
NORTH KOREA: Nervousness about North Korea did little to cloud investor sentiment in Asia, instead lifting defense-related stocks in Japan. President Donald Trump put North Korea on America’s terrorism blacklist, despite questions about Pyongyang’s support for international attacks beyond the assassination of its leader’s half brother in February. IHI Corp. (T:7013). surged 1.5 percent, while Mitsubishi Heavy Industries, Ltd. (T:7011) edged up 0.5 percent.
ANALYST VIEWPOINT: The standoff in Germany is “undoubtedly a blow for Merkel but highlights the vast difference of interparty opinions surrounding migration and energy policies,” Stephen Innes of OANDA said in a commentary. “Keep in mind; liquidity is exceptionally thin and could exaggerate moves. But this knee-jerk reaction does look a bit overdone as Merkel can still establish a minority government with either the FDP or Green Party,” he said