LONDON (Reuters) - Bulgaria's pro-EU GERB party narrowly won a parliamentary election on Sunday, seeing off a challenge by a pro-Russian Socialist Party which nonetheless made strong gains. The election had been seen as a test of Bulgaria's loyalties to the European Union, which it joined in 2007, and to Russia, with which it has historic political and cultural links.
GERB will now seek to bring about a coalition that will maintain the tight fiscal policies underpinning the lev currency’s peg to the euro. There are two more worrying angles to consider: it will likely have to court the United Patriots nationalist alliance which has been associated with some virulent anti-immigrant sentiment; and analysts remain sceptical that any of this will uproot widespread corruption in the EU’s poorest member state.
Yesterday's election in the small southern German state of Saarland was a dampener for the hopes of Martin Schulz, the new head of the centre-left SPD party, to unseat Angela Merkel in September's general election. Her CDU pulled off victory by a surprisingly comfortable margin - a result which was testimony to the popularity of the local CDU candidate but which will also prompt questions about whether Schulz's strong poll ratings can translate into electoral gains.
Barring agreement between Northern Ireland's two main parties before today's 1500 GMT deadline, the UK government will have to decide whether to call a fresh election or a return the region to direct British rule. Chances of any last-minute deal were dealt a blow yesterday after talks collapsed, with both parties citing a lack of progress. Northern Ireland has already had two elections in the past 12 months while the alternative - taking back rule to London for the first time since 2007 - is the last thing Theresa May's government wants to do as it embarks on Brexit.
The failure of U.S. President Trump to push his prioritised healthcare reforms through Congress on Friday has cast another pall over the so-called 'Trumpflation' trades that have buoyed world markets since November's election. Concern that Trump will face similar problems pushing through more market-sensitive tax cuts and spending plans have deflated further the already softening dollar, equities, bond yields and metals - exaggerated perhaps as we end approach the end of the first quarter on Friday.
Offsetting the market pessimism are some hopes that Trump, having pulled his healthcare bill, will now move more quickly on tax reform.
US stocks closed only marginally lower on Friday as the fate of the bill became clear, but S&P futures are marked down more than 1 percent early on Monday. Asia bourses were lower too, with Japan’s Nikkei underperforming with losses of more than 1 percent. The drop in the dollar was the most significant move, with euro/dollar surging to 3-1/2 month high just under $1.09 amid a burst of volatility in early European trade that has seen U.S. Treasury yields hit a one month low and European government bond yields fall more than 5 basis points across the board. European bourses have opened lower too.
Editing by Richard Lough