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DAX up, Euro hits one-month high as Merz wins German vote

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Germany likely heading for centrist grand coalition

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Wall St futures bounce ahead of Nvidia ( NVDA ) earnings

By Harry Robertson and Wayne Cole

LONDON/SYDNEY, Feb 24 (Reuters) - The euro and German

stocks rallied on Monday as investors welcomed Germany's

election result that put centrist parties on track to form a

coalition, although optimism was tempered by potentially tricky

negotiations over economic policy.

European shares ticked higher while Wall Street futures also

edged up after a sharp U.S. sell-off on Friday.

Friedrich Merz was set to become Germany's next chancellor

after his opposition conservatives won the national election on

Sunday. Merz should be able to form a so-called grand coalition

with the ruling centre-left Social Democrats, even though it

slumped to third behind the far-right Alternative for Germany.

"In the end (it was) a result that was close to the latest

exit polls and should be a very market-friendly outcome," said

Peter Schaffrik, global macro strategist at RBC Capital Markets.

The euro rose to a one-month high of $1.0528

before dipping to last trade 0.22% higher at $1.0481.

"While Merz seems determined to ease off the so-called debt

brake, which limits annual borrowing to 0.35% of GDP, it won't

be straightforward, because he will need a two-third majority in

parliament," said Susannah Streeter, head of money and markets,

Hargreaves Lansdown.

Meanwhile Germany's DAX stock index rose 0.73% in

early trading. The pan-European STOXX 600 index rose

0.19%, although tech stocks slipped.

German coalition talks start as EU leaders are set to hold

an extraordinary summit on March 6 to discuss additional support

for Ukraine and how to pay for European defence needs.

This week marks three years since the start of Russia's

full-scale invasion of Ukraine.

WALL STREET STEADIES

S&P 500 futures and Nasdaq futures both gained

0.6%. The Nasdaq fell 2.5% last week, its worst week in three

months, with losses led by the "Magnificent Seven" tech firms.

Wall Street took a hit on Friday when a survey on services

showed a shock slide in activity amid concerns about tariffs and

cost pressures.

That pullback raised the stakes for Nvidia's ( NVDA )

results on Wednesday where investors are looking for

fourth-quarter sales around $38.5 billion and first-quarter

guidance around $42.5 billion from the chip-making company.

The Federal Reserve's favoured measure of core inflation is

due on Friday and expected to show a slowdown to 2.6% from 2.8%,

but could be overshadowed by tariff worries.

A survey of U.S. consumers out on Friday showed inflation

expectations for the next five years climbed to 3.5%, the

highest since 1995.

"There are many irons in the fire, and markets don't have

the privilege of looking much beyond daily developments," said

Francesco Pesole, currency strategist at ING.

The dollar index, which tracks the currency against

six peers, was very slightly lower at 106.48.

The U.S. currency rose 0.17% against the yen to

149.54, after sliding last week on the back of rising

expectations of further rate hikes from the Bank of Japan.

In commodity markets, gold remained well supported at $2,946

an ounce, having climbed for eight weeks in a row.

Oil has been heading in the other direction in part on

speculation an eventual peace deal on Ukraine could see

sanctions eased on Russia, boosting its oil exports.

Brent was flat at $74.37 a barrel, continuing to

trade around its lowest level since late December.