By Sara Sjolin, MarketWatch
European stocks closed mostly lower Monday, with investors tracking developments in Italian politics after two populist parties said they had reached a deal to form a new government.
What are markets doing?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.91% slipped less than 0.1% to close at 392.19, edging back after scoring its longest weekly winning run since March 2015 last week.
Italy’s FTSE MIB index /zigman2/quotes/210598024/delayed IT:I945 +1.25% rose 0.3% to 24,221.47, as traders were watching developments in Italian politics.
In Germany, the DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +1.53% ended down 0.2% at 12,977.71 on Monday, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.63% closed marginally lower at 5,540.68. The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.85% fell 0.2% to 7,710.98.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0819% rose to $1.1975 from $1.1942 late Friday in New York.
What is driving the market?
Italy was the major focus in Europe on Monday after antiestablishment 5 Star Movement and hard-right League party over the weekend reportedly reached a deal on forming a governing coalition.
The new government—expected to be announced in coming days—would end more than two months of political deadlock in Italy after the country’s general election in early March produced an inconclusive result. A coalition deal between the two populist parties would also mark one of the biggest wins for European antiestablishment parties.
Trade talks between the U.S. and China were also in the limelight on Monday. Trump was seen as paving the way for constructive discussions with Beijing this week after he over the weekend offered a lifeline to struggling Chinese telecom giant ZTE.
There were no major European data releases on deck on Monday.
What are strategists saying?
“There is the clear positive to an end of over two months of political gridlock [in Italy]; however, there is a glaring negative in that such a coalition could impact on Italy’s relationship with the European Union, potentially throwing Italy’s slowly recovering economy into disarray,” said Jasper Lawler, head of research at London Capital Group, in a note.
“Anticipated measures include renegotiations of EU accords with a tougher stance, although a full-blown withdrawal from the European Union does not appear to be on the cards, which goes some way to explaining the inexistent response from the euro,” he added.
IWG PLC /zigman2/quotes/207263311/delayed UK:IWG +6.73% surged 23% after the workspace company late Friday said it has received an approach from Lone Star and two separate indicative proposals from Starwood Capital and TDR Capital about a potential takeover.
EDP-Energias de Portugal SA /zigman2/quotes/209931957/delayed PT:EDP +2.66% jumped 9.3% after China Three Gorges Corp. late Friday said it plans to launch a €9.07 billion ($10.8 billion) offer to buy the almost 77% it doesn’t already own in the Portuguese utility company.
Shares in betting companies rallied following news of a U.S. Supreme Court ruling in favor of the state of New Jersey in a case that could open sports betting around the nation. William Hill PLC jumped 11%, while Paddy Power Betfair PLC’s stock added 12%.
Sanofi SA /zigman2/quotes/206928357/delayed FR:SAN -1.41% /zigman2/quotes/201967021/composite SNY -0.79% rose 1% and Ablynx NV inched 0.4% higher after the two companies said Sanofi’s takeover offer of the Belgian nanobody-focused company will go ahead as planned.
Victrex PLC /zigman2/quotes/202943820/delayed UK:VCT +3.08% gave up 3.2% after chemical company said currency movements are likely to be a headwind in fiscal 2019.