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London - European equity markets steadied on Monday after Germany's leader Angela Merkel captured a third election victory, providing stability for Europe's biggest economy.
Shares won limited support from fresh data showing that the eurozone's manufacturing sector was growing at its fastest pace in 27 months.
London's FTSE 100 index slipped 0.20% to stand at 6 583.50 points in midday deals. Frankfurt's DAX 30 eased 0.03% to 8 673.35 points, while the CAC 40 in Paris added 0.10% to 4 208.12.
In foreign exchange, the European single currency slipped to $1.3508 from $1.3524 late in New York on Friday. The dollar fell to 98.94 yen from 99.35.
Chancellor Merkel's triumphant conservative Christian Democrats (CDU) won 41.5% of the vote.
However, the shock demise of Merkel's junior allies the pro-business Free Democrats (FDP) after more than half a century in parliament meant she now has to look for a new coalition partner.
"Risk tone improved Monday with investors responding well to news that Germany's Angela Merkel recorded the biggest victory in the country since 1990, winning her third term," said analyst Ishaq Siddiqi at traders ETX Capital.
"She still needs to find a coalition partner as she won 41.5% of the vote, not enough for a majority -- she may have to ask leftist rivals to join a coalition government.
"Still, the market is comforted by the fact that there will be no change to status-quo in Germany with growth set to continue in the country and the eurozone periphery staying on track of budget targets and fiscal reforms."
The conservatives' best result since the country's joyous reunification in 1990 meant Merkel nearly became the only chancellor to win an absolute majority since Germany's first post-war leader, Konrad Adenauer, 56 years ago.
"Whatever the look of any government that is formed, and this might take several days, one of the key factors that did come out of the campaign was the increasing opposition of a rising number of German voters to further bailouts of what they perceive as fiscally irresponsible peripheral European economies," said analyst Michael Hewson at traders CMC Markets UK.
"Any new government that chooses to ignore this rising scepticism in subsequent months is likely to come unstuck at the ballot box in any new state or European elections.
"With troika inspectors already in Athens to discuss the latest lack of progress in Greece's latest bailout plan and the current shortfall in the 2014 and 2015 budgets, it is a message that could well resonate in the coming months."
On Sunday, international creditors launched a new audit of Greek fiscal performance and reforms that will determine the release of a scheduled loan instalment of €1.0bn ($1.4bn) from the country's EU-IMF bailout.
Elsewhere on Monday, traders eyed news that eurozone business activity continued to pick up in September, hitting a 27-month high as the region climbed out of a record recession, according to a key survey.
The Composite Purchasing Managers' Index compiled by Markit Economics jumped to 52.1 points for September from 51.5 in August, pushing further beyond the 50-points boom-or-bust line.
On the company radar, British energy firm Centrica said Monday it would shelve two key gas storage projects in Britain at a cost of 240m ($385m, €284m).
The news sent Centrica's share price falling 1.77% to 395.1 pence.
