European stock markets hit by Germany and France's political upheavals

The equity markets across Europe kicked off the week on a negative note amid ongoing political turmoil in Germany and France. The German DAX fell 0.45%, the French CAC 40 slumped 0.71%, and the Euro Stoxx 600 index slid 0.12% on Monday.

The two largest European economies face mounting political and economic challenges, alongside US President-elect Donald Trump's tariff threats. The sell-offs in the European markets may only be a start as the DAX slipped for the second consecutive trading day from its all-time high.

The downbeat sentiment was in contrast to the US stock markets, with the tech-heavy Nasdaq reaching a new high, up 1.24% overnight. The S&P 500 rose 0.38%, while the Dow Jones Industrial average fell 0.25%. 

On the political front, German Chancellor Olaf Scholz lost a confidence vote in parliament, triggering an early Election in February, seven months ahead of schedule. Scholz's three-party ruling coalition collapsed last month after the Free Democrats Party withdrew amid infighting.

In France, the National Assembly approved a special law to allow the current tax-raising and government borrowings to roll over, temporarily avoiding a US-style government shutdown. However, the country still lacks a full package of the budget plan, leaving the newly appointed Prime Minister Francois Bayrou to face the same challenges that ousted his predecessor, Michel Barnier. 

Furthermore, the economic trajectory points to a further deterioration, particularly in the manufacturing sector. Both Germany and France's manufacturing Purchasing Manager Indices (PMIs) came in weaker than expected, suggesting that the recession deepened in the sector amid the political instability and weak global demands.

Adding to the pressure, China