German socialists stabiliseBy Vincent-Frédéric Mivelaz
Euromarkets were soothed by German socialists’ decision to join the country’s conservatives in a coalition government that will be headed by current Chancellor Angela Merkel. The DAX moved in line with other EU equity indices, while 2-year, 10-year and 30-year Bund yields fell to -0.572%, 0.651% and 1.255%.
The Social Democratic party on Sunday voted to join with Merkel’s Union parties (CDU/CSU) by a majority of 66%, 5 months after elections. They also approved an increase in Germany’s contribution to the EU budget. Merkel will start a fourth term as Chancellor, maintaining her policies and confirming Germany’s leadership in Europe.
CHF will weaken, as national bank profitsBy Peter Rosenstreich
Some of the risk that has boosted the Swiss Franc is deflating. Germany’s grand coalition is now firmly on track, and US President Trump’s trade war is more likely a threat than a reality. Italy’s elections were somewhat indecisive, which means that a game-changing shift towards anti EU policy is not imminent. We remain negative on CHF against USD and EUR.
Meanwhile, the Swiss National Bank turned in bumper results for 2017: profit of CHF 54.4 billion, up 29% from 2016, with CHF 49.7 billion earned in foreign currencies and CHF 3.1 billion from gold holdings. The central and the cantonal governments will be cheering, because they will share a profit distribution of CHF 2 billion.