By Sruthi Shankar
(Reuters) - German shares hit ten-day highs on Monday after the federal election outcome reduced the chances of a left-wing coalition forming a government, while broader European markets cheered a surge in crude prices that powered oil stocks.
Germany's blue-chip DAX jumped 0.9%, leading gains among regional indexes, while the pan-European STOXX 600 index added 0.4%.
Germany's centre-left Social Democrats were set to start trying to form a government after they narrowly won their first national election since 2005, saying they would seek to form a coalition with the Greens and the liberal Free Democrats in what is dubbed as the "traffic light" coalition.
While it might take a while before the new government is formed, investors were relieved that hard-left Linke party fell below the 5% threshold needed to enter parliament.
"The left wing Die Linke party's poor election showing appears to have ruled out a left wing alliance, and its likely negative impact on German stocks," according to BlackRock (NYSE:BLK) Investment Institute.
"We see the election outcome eventually resulting in a moderate left or right leaning government."
German real estate company Vonovia, aircraft engine maker MTU Aero Engines and renewables company Siemens Energy were the top gainers on the DAX.
The oil & gas index climbed 1.8% to hit a three-month high as Brent futures headed for $80 per barrel amid supply concerns. [O/R]
Oil majors TotalEnergies, Royal Dutch Shell (LON:RDSa) and BP (LON:BP) rose between 1.8% and 2.4%, providing the biggest boost to the STOXX 600.
While worries about hawkish central bank policies, fallout from China Evergrande's financial troubles and inflation have weighed on sentiment, investors are hoping that vaccination will drive a steady global recovery.
The STOXX 600 index has climbed 16.5% so far this year, falling slightly short of 18.6% rise in Wall Street's S&P 500.
IWG Plc jumped 6.3% to the top of STOXX 600 after Sky News reported that British office rental firm is exploring a multi-billion pound break-up that would involve splitting it into several companies.
Zooplus AG gained 4.2% after Swedish private equity firm EQT AB made an offer to buy the online pet supplies' retailer for about 3.36 billion euros ($3.94 billion), trumping a 3.29-billion-euro bid from U.S. private equity Hellman & Friedman.
Spain's Cellnex Telecom slid 3% after Citigroup (NYSE:C) downgraded the stock to "sell", citing valuation concerns.