LIVE MARKETS-One month until Germany votes: the impact on stocks

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ONE MONTH UNTIL GERMANY VOTES: THE IMPACT ON STOCKS

In a month's time, German voters will head to the booth to vote for a new government, and polls point to a centre-right CDU/CSU-led coalition government, with either the SPD or the Greens.

Either coalition would promise pro-growth reforms, according to Barclays, but the likely scale of those measures and how markets might react is unclear.

For equities, Barclays believes they could "respond well" to a growth-focused coalition.

"We believe that the upcoming election could be a positive catalyst for German equities," Barclays writes.

"The pro-growth nature of the expected policies could help to lift investor sentiment towards both the large cap cyclical laggards and mid caps, in our view."

Investors may already be front-running a positive election outcome.

The blue-chip DAX index .GDAXI is up almost 7% year-to-date and Bank of America's latest fund manager survey showed asset managers increased their exposure to European stocks in January to a net 1% overweight from 22% underweight, the second-largest jump in a quarter of a century.

"We think that a pro-growth policy shift could still help to reignite interest from the global investors who divested Germany, and Europe more broadly," Barclays adds.

"We see some upside for both domestic names and those foreign stocks with high exposure to Germany, which could benefit from a pro-growth policy shift."

(Samuel Indyk)

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