LONDON: Global stock markets diverged Monday as investors stuck to the sidelines in face of the US government shutdown.
While Wall Street opened lower, Europe's main stock markets were mixed, with prices edging higher in Frankfurt and Paris but easing in London.
"Stock markets in Europe are a mixed bag... as investors assess the political landscape," said CMC Markets UK analyst David Madden.
"The shutdown of the US government has not spooked investors as there was a similar muted reaction the last time it happened in 2013, but nor has it given traders a reason to buy into the market."
Forex.com analyst Fawad Razaqzada said the market "remains fixated on developments in Washington."
"The fact that neither the dollar nor the stock markets have sold off heavily yet means investors are probably still hopeful -- maybe rightly so -- that there will be some sort of a resolution in Washington soon. If that's proven to be the case then we could see a speedy recovery in both markets," he said.
Accendo Markets analyst Mike van Dulken said that equities had "made a negative start to the week as investors weigh up the US government shutdown. At the same time, we get opening gambits from the World Economic Forum in Davos, await more on German coalition talks and prepare for results from HP, Halliburton and Netflix."
- German breakthrough? -
In the eurozone, Germany's centre-left Social Democrats voted Sunday to begin formal coalition talks with Chancellor Angela Merkel's conservatives.
The news, which brought Europe's top economy a step closer to a new government after months of deadlock, helped guide the euro higher.
"This is a step in the right direction for German politics and traders will be watching it closely," Madden noted.
The thumbs-up will come as a huge relief to Merkel, staving off the threat of snap polls or the unappealing prospect of leading an unstable minority government.
"Eurozone investors will be breathing a sigh of relief this morning, as Angela Merkel took one step closer to cementing a fourth term as German chancellor," added IG analyst Joshua Mahony.
- Asia extends rally -
Asian equities reversed early losses on Monday to build on last week's impressive rallies, as investors took heart from improving global economic data.
Hong Kong closed up 0.4 percent to set a new record and Shanghai also added 0.4 percent. Tokyo finished slightly higher on late bargain-buying.
Possible market-moving events this week include meetings at the European Central Bank and Bank of Japan, which will be closely watched for signs of further policy tightening.
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