Two of Germany's, and Europe's, largest financial institutions note how investors have been remarkably relaxed amid North Korea's missile tests and the upcoming national polls to choose a new government in Berlin.

Renewed tensions around North Korea's nuclear weapons programme, fuelled by another missile launch by the Communist nation last week, appear to have left markets largely unruffled although potential effects could be felt later, Deutsche Bank Wealth Management says. Meanwhile, another major European financial institution, Allianz Global Investors, has noted that Germany's upcoming national elections barely register on investors' radars.                       

Far from being hit, Asian shares (as measured by the MSCI Asia Pacific Index ex Japan) briefly hit a 10-year high last Wednesday, while Japanese shares (as measured by the Nikkei) hit a one-year high. The main driver was the rise in US markets, but the temporary reduction in tensions around North Korea is likely to have helped too. The launch of a second missile over Japan was met with only a muted immediate market reaction, the bank noted in a report.

The US has criticised China for not doing more to put pressure on North Korea, fuelling speculation that large Chinese state-owned banks and energy firms might be sanctioned by the US unless the Asian nation uses its muscle over its neighbour to force change.

“Implementing such sanctions could however have knock-on effects for U.S. businesses too, and is likely to be resisted by US business,"Tuan Huynh, chief investment officer for Asia-Pacific at the German bank, said.

Germany
Allianz Global Investors noted, meanwhile, that while headlines have been grabbed by events in North Korea or worries about US protectionism, Germany's national polls, due on 24 September, have "barely registered".

"Quite the contrary, in fact: The 24 September election in Germany is shaping up to be something of a non-event in Europe’s elections `super cycle', which started in the Netherlands last March. Most polls indicate that G1ermany’s centre-right Christian Democratic Union (CDU) and Christian Social Union (CSU) parties will emerge victorious, and that Chancellor Angela Merkel will continue her leadership for the next four years," Allianz GI said.

"Barring any major upsets, investors should focus on the fact that Germany will most likely have pro-European Union leadership in place come 25 September, and that Germany’s economy will continue to be the engine that is powering a resurgent Europe. The continuity of Mrs Merkel as Chancellor, assuming her party emerges victorious, would only stand to underscore this position. Mrs Merkel promises to provide her country with a proven, steady hand on the tiller during a time of geopolitical turmoil. This should be reassuring not only to the majority of German citizens, but to the markets as a whole," it said.