Morning Bid: German political drama adds to Trump risks for Europe

What's happening:

Political turmoil in Germany is casting a shadow over Europe's hopes for stability as markets fret over the implications for the region's largest economy and its role in the European Union.

Chancellor Angela Merkel's coalition talks collapsed on Sunday, raising the prospect of fresh elections and leaving the country in political limbo.

The news sent shockwaves through financial markets, with the euro falling sharply and stocks in Europe tumbling. The uncertainty is also prompting investors to seek out safe havens, such as the Japanese yen and gold.

Why it matters:

Germany is the linchpin of the European economy, and its political instability is a major concern for investors.

If fresh elections are held, it could take months to form a new government, leaving Europe in a state of uncertainty at a time when it is already facing a number of challenges, including Brexit and the rise of populism.

The political turmoil in Germany is also a boost for U.S. President Donald Trump, who has repeatedly criticized Merkel and her policies.

What's next:

It is unclear what will happen next in Germany. The country's president, Frank-Walter Steinmeier, has called on Merkel to try to form a minority government, but it is unclear whether she will be able to do so.

If Merkel is unable to form a government, fresh elections will be held. The next steps will depend on the outcome of those elections.