German Coalition Talks Collapse

Angela Merkel's conservative alliance secured the largest proportion of votes in the September polls but finished with its worst result since 1949, forcing the long-serving German leader to try to stitch a coalition majority together. Those efforts hit a major roadblock after the chairman of the pro-business Free Democratic Party withdrew from negotiations late Sunday. The latest development left Germany with two unprecedented options – either Merkel forms a minority government, or else the President will call for a fresh election.

The likelihood of prolonged uncertainty in Germany is worrying investors considering Merkel has long been viewed as Europe's pre-eminent leader, having steered Germany through both the 2008 financial crisis and the subsequent Greek debt crisis. The Euro slumped broadly in early Monday trade, with EURUSD pulling further away from a one-month high of 1.1860 reached on Wednesday.

Growth in Japanese outbound shipments held steady in October, signalling that brisk global demand for cars and electronics manufactured in the country will likely support economic recovery during the current quarter. Data from the Ministry of Finance released early Monday showed exports climbing 14.00% year-on-year last month, following a 14.10% gain in September compared to analyst estimates anticipating a 15.80% increase.

Imports rose 18.90% on year to October versus the median estimate for a 20.20% increase. The heightened outbound shipments resulted in a narrow surplus, with the favourable balance slipping to JPY 285.40 billion ($2.54 billion) from the JPY 667.70 billion surplus reported in September. Notably, China overtook the United States during the month as the top destination for Japan's exports in October, with outbound shipments to Asia's largest economy soaring 26.00% to JPY 1.35 trillion ($12.00 billion). USDJPY is down early following the overnight reopening, falling beneath key support at 112.000.