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Olaf Scholz is now the betting market favorite to succeed Angela Merkel

There’s a new front-runner in the race to lead Germany after Angela Merkel — Olaf Scholz, of the center-left SPD party.

According to the betting market site Smarkets, Scholz’s chances have jumped from 3% to 55% in just four weeks, as Armin Laschet of Merkel’s CDU party has tumbled to 39% from 85%. Germany heads to the polls on Sept. 26.

Even if Scholz becomes chancellor, the mix of party composition is wide open and is likely to involve post-election negotiations. The favorites, so to speak, are a coalition of SPD, Greens and the FDP — at just 25% probability.

The German DAX
DAX,
+0.15%

stock market index has modestly underperformed the broader European market this year, with a 15% gain compared to a 19% rise for the Stoxx Europe 600.

The more telling action seems to be in the bond market. The yield on the 10-year bund
TMBMKDE-10Y,
-0.386%

rose as high as -0.07% this year, before falling to -0.5% as Merkel’s center-right coalition had improved in the polls, but now is rising back, at -0.39% on Thursday.

“More fiscal easing in Germany under a SPD-led coalition government remains an upside risk scenario,” said economists at Goldman Sachs.

Thursday saw muted action in European markets, with the Stoxx Europe 600
SXXP,
+0.28%

rising 0.2%.

The biggest Stoxx 600 gainer was biopharmaceutical Swedish Orphan Biovitrum
SOBI,
+27.39%
,
which rose 26% after recommending a buyout offer from U.S. private equity firm Advent International Corp. and Singapore’s Aurora Investment, worth 69.4 billion kronor, or around $8.1 billion.

Video games maker CD Projekt
CDR,
+12.61%

climbed 11% in Warsaw after a smaller-than-forecast profit decline. Its bug-ridden Cyberpunk 2077 game returned to the Sony PlayStation Store on June 21, and the company is planning new versions of Cyberpunk and The Witcher 3 late this year.

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