European stock markets opened the week with losses, as political instability in Germany and France, along with ongoing economic challenges, weighed heavily on investor sentiment. The German DAX dropped by 0.45%, the French CAC 40 fell 0.71%, and the Euro Stoxx 600 index declined by 0.12% on Monday.
The downturn comes as both Germany and France face mounting political and economic difficulties, compounded by US President-elect Donald Trump’s tariff threats. The DAX’s slide marked its second consecutive day of losses, falling from its all-time high.
In contrast, the US stock markets saw positive movement, with the tech-heavy Nasdaq hitting a new high, rising by 1.24%. The S&P 500 gained 0.38%, while the Dow Jones Industrial Average slipped by 0.25%.
The political turmoil in Germany escalated when Chancellor Olaf Scholz lost a confidence vote, leading to early elections in February, seven months ahead of schedule. Scholz’s coalition collapsed after the Free Democrats Party withdrew from the government following internal disagreements. In France, the National Assembly passed a temporary law to avoid a government shutdown, but the country still lacks a comprehensive budget plan, leaving Prime Minister François Bayrou to navigate the same challenges that led to the resignation of his predecessor, Michel Barnier.
Economic indicators also pointed to further trouble, particularly in the manufacturing sector. Both Germany and France’s Manufacturing Purchasing Manager Indices (PMIs) were weaker than expected, signaling a deeper recession amid political instability and weak global demand. Adding to the pressure, disappointing economic data from China showed sluggish consumer demand, further dampening European market sentiment.
European consumer and energy stocks were hit hardest by these concerns, with the Euro Stoxx Luxury 10 Index dropping 0.82% and the Stoxx Europe 600 Energy Index falling 0.98%.
