Stock markets are not that happy with the Spanish election outcome (JAVIER SORIANO)

London (AFP) – Europe’s stock markets had a lacklustre session Monday as a Spanish election brought uncertainty and weak eurozone data weighed, but were helped off their day’s lows by another record-breaking Wall Street performance.

The broad S&P 500 index reached a fresh high in the New York morning, while the Dow Jones flatlined and the Nasdaq posted small gains.

China-US trade talks came back to the fore, with Treasury Secretary Steven Mnuchin saying that they were nearing a decisive moment.

Oil prices were volatile, having shed three percent on Friday after US President Donald Trump said Saudi Arabia and others in OPEC had agreed to his request for higher crude output.

The focus in Europe was firmly on Spain, which now faces weeks of coalition talks after Prime Minister Pedro Sanchez’s Socialists won snap elections on Sunday without a majority, splitting the right-wing bloc but letting ultra-nationalists into parliament.

The results raise the spectre of another period of instability for Spain, with Sanchez depending on alliances with hostile rivals.

– ‘Political impasse’ –

“A long-lasting political impasse can negatively affect the economy, causing companies and consumers to postpone investment decisions and wait to recruit,” said Steven Trypsteen, an economist at ING.

With the country set to return to the polls on May 26 for regional, local and European Parliament elections, a new government is not likely to be formed before June.

Madrid’s benchmark IBEX 35 index closed a touch higher, having spent most of the session in negative territory.

“Obviously the prospect of higher taxes and a less market-friendly government is not ideal for stock markets,” Oanda analyst Craig Erlam told AFP.

Sentiment was also hobbled by news that economic confidence in the single currency area sank in April to hit the lowest level for more than two years.

“The need for a coalition in Spain — and a socialist one at that, much to the disappointment of investors — helped drag the IBEX lower,” said Spreadex analyst Connor Campbell.

“Combine that with news that economic confidence in the eurozone is at a two-year low, and there was little reason for the region’s indices to continue the kind of positive run that has been a fixture for most of April.”

– US-China trade talks –

In Asia, markets traded mixed as investors struggled to track another record lead from Wall Street that was fuelled by more strong corporate earnings.

Adding to the upward momentum was data showing the world’s biggest economy expanded 3.2 percent in January-March, well up from forecasts and sharply higher than the 2.2 percent seen at the end of 2018.

Hong Kong stocks rose one percent and Singapore added 1.3 percent, while Shanghai slipped 0.8 percent on concerns that Chinese authorities will wind back on recent market-boosting monetary easing measures. Tokyo is shut for holiday.

Eyes now turn to Beijing, where top US negotiators will return for another round of trade talks with their Chinese counterparts, with the White House saying issues to be covered include intellectual property, forced technology transfer, agriculture and enforcement.

“I think there’s a strong desire from both sides to see if we can wrap this up or move on,” Mnuchin said in an interview on Fox Business Network.

While the general consensus is for the two to eventually reach a deal to end their long-running trade war there are still a number of sticking points, and Trump has warned he is willing to walk away from talks if he is not happy with their progress.

– Key figures around 1540 GMT – 

Madrid – IBEX 35: UP 0.1 percent at 9,517.2 points (close)

London – FTSE 100: UP 0.2 percent at 7,440.66 (close) 

Frankfurt – DAX 30: UP 0.1 percent at 12,328.02 (close)

Paris – CAC 40: UP 0.2 percent at 5,580.98 (close)

EURO STOXX 50: FLAT at 3,501.94

New York – Dow: FLAT at 26,543.88

Hong Kong – Hang Seng: UP 1.0 percent at 29,892.81 (close)

Shanghai – Composite: DOWN 0.8 percent at 3,062.50 (close)

Tokyo – Nikkei 225: Closed for holiday

Euro/dollar: UP at $1.1168 from $1.1151 at 2100 GMT Friday

Pound/dollar: UP at $1.2924 from $1.2916 

Dollar/yen: UP at 111.81 from 111.58

Oil – Brent Crude: UP 3 cents at $71.66 per barrel

Oil – West Texas Intermediate: DOWN 21 cents at $63.09

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.