Europe markets close lower as German stocks cling to post-election gains; Just Eat shares surge 54%

Europe's regional Stoxx 600 index provisionally closed 0.1% lower on Monday, with broad sectoral declines across mining, consumer cyclicals, industrials and more offsetting strong gains in utilities and consumer stocks.

After a strong run through February, the Stoxx 600's performance has stuttered in recent sessions, though it still ended last week with its ninth straight weekly gain.

Germany's DAX closed 0.6% higher as investors monitored the election result and what comes next, even as France's CAC 40 dipped 0.78% and the U.K.'s FTSE 100 closed flat.

— Jenni Reid

Carsten Brzeski, global head of macro at ING Research, discusses prospects for a new German coalition government under Friedrich Merz, and the likelihood of changes to the country's "debt brake" rule.

The Bank of Israel left interest rates unchanged at 4.5%, where they have stayed since January 2024, despite a jump in inflation at the start of this year.

"In view of the continuing war, the Monetary Committee's policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity," a statement from the central bank's website said. "The interest rate path will be determined in accordance with the convergence of inflation to its target."

Economic growth remains weak in Israel since the start of the war with Hamas in the Gaza Strip. The annual inflation rate for the country rose to 3.8% in January from 3.2% in December. The Israeli government's annual inflation target is between 1% and 3%.

- Natasha Turak

U.S. stocks began Monday's trading session in positive territory.

The S&P 500 climbed 0.4%. The Dow Jones Industrial Average advanced 160 points, or around 0.4%. The tech-heavy Nasdaq Composite gained 0.3%.

— Hakyung Kim

The German election result could provide some positive momentum to the struggling German automotive industry, Michael Field, chief equity strategist at Morningstar, told CNBC's "Squawk Box Europe" on Monday.

"Our view on the autos is that the sector is so badly beaten up. Yes, there's some huge concerns. Yes, they've been hit by every side, Chinese EVs proliferating Europe, the Chinese consumer buying less European EVs, and now the threat of tariffs in the U.S. So it's been a pretty bad year or two for the German automakers," Field said.

"But our stance is that it doesn't take a lot to turn that momentum and shift that slightly in the positive direction, and a new government in place with a mandate to really take down energy prices, trying to improve competitiveness in the economy, any little bit of give there could really give that sector the booster it badly needs at this stage."

German auto giants traded slightly higher Monday, with Volkswagen up 2.3%, Mercedes-Benz Group up 1% and BMW up 0.8%. Auto industry suppliers Continental and Hella were 1.5% and 1.2% higher, respectively.

— Jenni Reid

Britain's largest defense firm BAE Systems' share price rose nearly 4% on Monday after the company won a $230 million contract with NASA over the weekend.

NASA announced on Friday that it awarded a delivery order to the defense firm's Space & Missions Systems base in Boulder, Colorado, to build spacecraft for its Lagrange 1 Series project.

The award, made under the Rapid Spacecraft Acquisition IV contract, is worth a total of $230.6 million, and the project will take place from February 2025 to February 2035.

BAE Systems reported higher annual profits last week, with its order backlog rising 11% to a record high at the end of 2024, and annual revenue increasing 14% in 2024.

Meanwhile, as defense stocks soared amidst Ukraine peace talks, the company's share price rose 9% on Feb. 17 —  at the time its highest daily gain since July 3, 2022, per FactSet data.

— Sawdah Bhaimiya

Germany's MDAX — which consists of Germany's biggest midcap stocks — was up 2.3% at 11:57 a.m. London time, positioning the index for its largest daily gain since late 2023.

Fintech firm Hypoport led the gains on the index, up more than 8% during morning trade, while companies including TAG Immobilien, Evotec and Jungheinrich all gained more than 5%.

— Chloe Taylor

German bond yields and the euro inched higher after the outcome of Germany's federal elections on Sunday.

Germany's 10-year Bund climbed two basis points to 2.487%, while the 5-year Bund was up nearly two basis points to 2.254%.

Meanwhile, the Euro was up 0.21% against the dollar and 0.12% against the British Pound.

The moves came after Germany's conservative alliance, which includes the Christian Democratic Union (CDU) and its sister party the Christian Social Union (CSU) secured the largest share of votes in the federal election.

This puts the party's lead candidate Friedrich Merz in prime position to take over from Olaf Scholz as chancellor of Europe's largest economy.

— Sawdah Bhaimiya

Germany's Dax index was up 0.86% at 10:00 a.m. London time, paring losses seen earlier in Monday's session.

Real estate firm Vonovia, utilities giant E.On and arms manufacturer Rheinmetall all gained around 4% during morning trade, while automakers Porsche, Volkswagen, Mercedes Benz and BMW also saw gains.

— Chloe Taylor

The U.K.'s National Grid announced Monday it had agreed to sell its U.S. onshore renewables business to private equity firm Brookfield Asset Management in a deal worth $1.74 billion.

The business being acquired by Brookfield develops, constructs and operates solar, onshore wind and battery storage assets in the United States.

— Chloe Taylor

The preliminary result of the German federal election points to a two-party coalition, according to Deutsche Bank — an outcome that could bolster the country's defense spending.

After Germans cast their votes on Sunday, preliminary results showed the allied Christian Democratic Union and Christian Social Union (CDU/CSU) parties won the highest proportion of votes, with a combined 28.6%. The far-right AfD came second with 20.8% of the votes, while incumbent Chancellor Olaf Scholz's Social Democratic Party (SPD) came third with 16.4%.

In a note to clients on Monday, economists at German lender Deutsche Bank speculated that a two-party coalition between the CDU/CSU and the SPD is now the most likely outcome, with immigration and defense "the most immediate issues in coalition talks."

"In our view, Europe's challenged security architecture makes it highly likely for CDU/CSU and SPD to agree on higher defense spending in principle … Foreign policy developments over the last fortnight have provided a political pivot for both parties to commit to greater defense spending," the economists wrote.

In recent weeks, the Trump administration in the U.S. has pressured European NATO allies to increase their spending on defense, with NATO Chief Mark Rutte suggesting member states could soon have a target of spending "at least" 3% of GDP on defense. In 2024, Germany spent an estimated 2.12% of GDP on defense, according to NATO data.

"Although a new target may be formulated only after the NATO summit in June, we would assume that defense spending will likely rise to at least 2.5% of GDP over the next term, with a meaningful increase as early as 2026," Deutsche Bank's economists said.

"The tricky question, however, is how to finance this. Any debt brake reform, including for defense spending, would rely on support from one of the fringe parties. This is not impossible, but it would require significant political compromises."

— Chloe Taylor

European food delivery giant Just Eat Takeaway.com is poised to be acquired by Dutch technology investor Prosus in an all-cash deal worth roughly 4.1 billion euros ($4.3 billion).

"Acquiring Just Eat Takeaway.com provides a unique opportunity for Prosus to build a European food delivery champion and strengthen Prosus' position in a key growth sector, complementing its existing food delivery footprint outside of Europe," the companies said in a joint statement Monday.

Read the full story here.

— Sam Meredith

Good morning from London, and welcome to CNBC's live blog covering all the action and business news in European financial markets on Thursday.

Futures data from IG suggests a generally positive open for European indexes, with London's FTSE 100 seen opening 0.15% higher, France's CAC 40 and Germany's DAX are seen opening around the flatline, and Italy's FTSE MIB slightly higher.

The pullback in sentiment among European bourses comes ahead of the latest indicator of the state of health of major regional economies, with gross domestic product readings from the U.K. and European Union on Thursday.

European markets had ended the day higher on Wednesday, with the pan-European Stoxx 600 index rising 0.55% after the S&P 500 and Nasdaq Composite rallied to new records yesterday. Investors are gearing up for more inflation data to assess the state of the U.S. economy.

The producer price index, due Thursday, will be significant factors in the direction interest rates take at the Federal Reserve's next meeting in September.

— Holly Ellyatt