German shares fall, bond yields dip after Merz setback in parliament

MILAN, May 6 (Reuters) - German shares extended their fall on Tuesday from near record levels and bond yields dipped after conservative leader Friedrich Merz failed to garner the parliamentary majority needed to become chancellor in a first round of voting.

"This is a significant negative," said Berenberg economist Holger Schmieding. "He is still likely to get elected but this shows that the coalition is not united, which could weaken his (Merz) ability to pursue policies".

By 0837 GMT, the blue-chip DAX .GDAXI index was down 1.1% following nine straight positive sessions, while the domestically focussed mid-cap MDAX .MDAXI fell 1.8%.

German government bond yields DE10YT=RR turned lower on the day, with two-year yields last down 1.3 basis points at 1.76%. The euro was around 0.2% higher on the day at $1.1335 EUR=EBS