European stock markets were mixed on Monday having ended last week with a strong rally, as the leaders of Finland and Sweden confirmed they intend to join Nato.
In London, the FTSE 100 (^FTSE) ended 0.6% higher after a negative start, with travel and leisure and chemicals underperforming, while telecoms emerged on top thanks to a near 10% stake purchase of Vodafone (VOD.L) by a UAE rival.
The historic shift with the two Nordic countries, Finland and Sweden, moving to join Nato comes as a result of Russia's invasion of Ukraine.
In a statement, Sweden's Social Democrats said they would "work toward" membership, with the country’s prime minister Magdalena Andersson saying: “We believe Sweden needs the formal security guarantees that come with membership in Nato.”
Watch: Finland, Sweden inch closer to joining NATO alliance
Finland, which shares an 810-mile (1,300km) border with Russia, said: “A protected Finland is being born as part of a stable, strong and responsible Nordic region. We gain security, and we also share it. It’s good to keep in mind that security isn’t a zero-sum game.”
Russia sees Nato as a security threat and has previously warned of "consequences".
Despite a rally on Friday, the Nasdaq 100 was still down 24% on the year to date, the S&P 500 was down 15% and the Dow was down 11%.
It came as manufacturing activity declined in New York this month, according to new data. The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, fell to -11.6 this month, down from 24.6 in April.
Economists had expected the index to fall slightly to around 16.5, which highlights that conditions deteriorated.
Stocks in Asia were mixed on Monday as traders weighed up a Wall Street bounce sparked by a rally among tech-rich stocks and a stalling Chinese economy.
In Hong Kong, the Hang Seng (^HSI) was flat on the day, while the Shanghai Composite (000001.SS) fell 0.3%. Tokyo shares managed to push higher, with the benchmark Nikkei (^N225) index gaining almost 0.5%.
It came as China's economy slumped in April as strict COVID lockdowns took their toll on retail and factory activity.
Retail sales shrank 11.1% compared to a year earlier, the biggest fall since March 2020, and almost twice as bad as the 6.1% fall expected by economists.
Meanwhile, factory production dropped 2.9% year-on-year, the largest decline since February 2020. China’s labour market also took a hit, with the nationwide jobless rate rising to 6.1% in April, up from 5.8%. This was the highest rate since February 2020.
“Clearly, it is China’s zero-tolerance policy that is causing the industrial output and consumer spending to break down, and currently, they are sitting at their worst level since the pandemic began,” Naeem Aslam, analyst at AvaTrade, said.
“The data has made traders anxious about the global economic outlook. The general trend is likely to prevail in the market, which is that the dollar index continues to act as a safe haven, Treasuries will soar, and oil prices may move further lower; this shows that this week could be another week of weakness for the global equity markets.”
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