European stocks notched modest gains Monday, while government bonds continued to rally, as investors focused on political risks in the region and a pending address to Congress from U.S. President Donald Trump.
The region-wide Stoxx 600 Europe Index was quoted 0.16% lower at 369.40 points by 10:45 GMT, with most major benchmarks recording cautious gains. Britain's FTSE 100 managed a small 2 point advance, helped in part by a weaker pound, which fell 0.51% to 1.2399 against the U.S. dollar on reports that Prime Minister Theresa May could be willing to agree to a second referendum on Scottish independence if the vote were held after Britain had formally exited from the European Union.
However gains were limited by steep declines for certain companies in the insurance sector, which fell sharply after the government reduced the discount rate at which personal injury claims can be calculated by 325 basis points to -0.75%. The move will likely lead to significant increases in lump sum payouts for successful litigants.
Germany's DAX index was marked 0.12% higher, even as exchange operator Deutsche Boerse AG's (DBOEY) shares fell more than 3% after its planned merger with the London Stock Exchange Group (LDNXF) appeared close to collapse.
The LSE said late Sunday that it was unlikely to meet a request from the EU to sell 60% of its MTS government bond trading platform in order to comply with concerns that the €29 billion merger with the Deutsche Boerse could hamper competition in the region's financial services sector. The LSE had until today to provide details as to how it would comply with the request.
"Taking all relevant factors into account, and acting in the best interests of shareholders, the LSEG Board (Sunday) concluded that it could not commit to the divestment of MTS. LSEG will therefore not be submitting a remedy proposal with respect to MTS," the statement continued. "Based on the Commission's current position, LSEG believes that the Commission is unlikely to provide clearance for the Merger."
LSE shares fell more than 3% in early London trading, the biggest single-day decline since the June 23 Brexit vote, to change hands at closed at 3,029.00 pence each. Deutsche Boerse shares were also marked 3% lower by 08:30 GMT at €79.00 each.
Government bond markets were also active, with Germany's benchmark 10-year bond yields fell to a year-to-date low of 0.19% while its 2-year notes, known as shatz, traded at a record low 0.96%. France's government bonds also rallied, taking the 10-year yield to a one-month low of 0.90%, after weekend polls showed increasing support for independent centrist Presidential candidate Emmanuel Macron, who is now likely to score a clear second-round win against far-right rival Marine Le Pen when the two-stage elections begin on April 23.
Asia stocks were largely weaker overnight, with the region-wide MSCI Asia ex-Japan index falling 0.24% by 07:00 GMT and the benchmark Nikkei 225 recording its third consecutive session loss with a 0.91% decline as a stronger yen hit export stocks.
The U.S. dollar index, a measure of the currency's strength against a basket of its global peers, traded modestly higher in Asia at 101.04 but with little conviction in the gains ahead of President Trump's address to U.S. lawmakers Tuesday, where he is expected to provide details on both his tax reform agenda and his infrastructure spending plans.
Global oil markets were firm, owing in part to the dollar's indecision, with traders taking cues from data showing increased bets for price increases and unprecedented discipline from OPEC members on production cuts. Figures from the U.S. Commodity Futures Trading Commission published last week indicated investors held record long positions on crude futures, while analysis from the Energy Information Agency in Paris said OPEC members were complying with around 90% of their agreed 1.8 million per barrel daily production cuts.
WTI futures for April delivery were marked around 1% higher from Friday's close at $54.48 per barrel while Brent contracts for the same month were trading at $56.96.
The Dow Jones Industrial Average closed out Friday with weekly gains for the third time in a row as a record-breaking streak propelled the index higher.
The Dow has risen 0.96% over the past four days in a holiday-shortened week. The S&P 500 increased 0.69% and the Nasdaq jumped 0.12%.
The Dow climbed every day this week, securing its longest record-breaking streak in three decades. The blue-chip index has closed higher after 11 consecutive sessions thanks to optimism over a forthcoming tax plan from the White House.
U.S. futures prices are indicating small declines for the three benchmarks as of 08:45 GMT.