Europe close: Stocks mixed at start of short holiday week

European markets finished in a mixed state on Monday, at the start of a shortened week ahead of Christmas and as global attention turned to news of a potential merger between Japanese auto giants Honda and Nissan.

The pan-European Stoxx 600 rose 0.14%, closing at 502.91, while the FTSE 100 in London outperformed its peers, climbing 0.22% to 8,102.72.

In contrast, Germany's DAX declined 0.18% to settle at 19,848.77, and France's CAC 40 dipped slightly, slipping 0.03% to 7,272.32.

“Despite seeing the largest daily rally since early November on Friday, the S&P 500 ended its second straight week in the red amid higher US yields,” said IG senior technical analyst Axel Rudolph.

“Asian markets followed Friday's US' lead and mostly ended the day in positive territory but European and US markets didn't follow suit.

“The UK economy stalled in the third quarter, following a downward revision from +0.1%, and German import prices rose for the first time in three months.

“This puts a damper on proceedings despite a higher Chicago Fed national activity index reading.”

UK economy stagnates in third quarter, consumer confidence retreats stateside

In economic news, the UK economy stagnated in the third quarter, with no growth recorded according to revised figures from the Office for National Statistics (ONS).

That marked a downward adjustment from the previous estimate of 0.1% growth.

The ONS also lowered its estimate for second-quarter growth to 0.4% from 0.5%.

ONS also reported a mixed performance across sectors, with a 0.7% rise in construction offset by a 0.4% decline in production, while the services sector remained flat.

“The economy was weaker in the second and third quarters of this year than our initial estimates suggested with bars and restaurants, legal firms and advertising, in particular, performing less well,” said Liz McKeown, director of economic statistics at the ONS.

“The household saving ratio fell a little in the latest period, though remains relatively high by historic standards. Meanwhile real household disposable income per head showed no growth.”

Meanwhile, consumer confidence in the United States unexpectedly retreated in December, breaking a two-month streak of strong gains.

The Conference Board’s consumer confidence index dropped to 104.7 from 112.8 in November, falling short of analysts' expectations for a slight increase.

That marked the first decline since September, as optimism tied to post-election momentum and improving economic conditions gave way to renewed concerns about the future.

The expectations index, a key indicator of outlook, fell sharply to 81.1, hovering just above the recession-warning threshold of 80, while the present situation index dipped slightly to 140.2.

Carmakers in focus on Honda-Nissan talks, Novo Nordisk rebounds

In equity markets, shares of Renault fell 1.2% on Monday following news that Nissan and Honda had signed a memorandum of understanding to discuss merging their operations.

The talks, which would take place over the next six months, were aimed at forming a joint holding company by August 2026.

Renault holds a stake of just under 16% in Nissan.

Sector peers Stellantis and Volkswagen also declined, with Stellantis down 0.29% and Volkswagen sliding 1.98%.

In the insurance sector, Aviva rose 0.52% after announcing it would acquire Direct Line Insurance Group for £3.75bn.

Direct Line shares surged 4.03% on the deal, which values the company at a 73.3% premium to its late-November price.

Aviva highlighted plans to save £125m annually through job cuts, economies of scale, and efficiency gains.

Elsewhere, Novo Nordisk rebounded sharply, rising 5.67%, after Friday’s selloff erased $125bn from its market value.

The earlier decline followed disappointing results for its experimental obesity drug CagriSema.

Reporting by Josh White for Sharecast.com.