Europe stocks close higher in the wake of EU elections; Renault jumps 12% on Fiat merger talks

Germany’s DAX closed about 0.5% higher while France’s CAC climbed 0.3%. Italy’s FTSE MIB jumped 0.6% initially, but fell into negative territory during the afternoon session after a report Brussels is considering disciplinary action over Rome’s failure to rein in public debt.

Markets in the U.K. and U.S. were closed Monday, meaning trading volumes were low.

Investors in Europe were largely focused on results of the EU parliamentary elections. Results showed a strong showing for Liberal and Green parties, while euroskeptic groups in Britain and France held the gains they saw in 2014.

Pro-EU parties are still expected to make up the majority of the Parliament, however, holding on to about two-thirds of the seats. Right-wing populist parties in both the U.K. and France made solid gains, with Nigel Farage’s Brexit Party comfortably beating Britain’s two main parties and Marine Le Pen’s National Rally narrowly beating President Emmanuel Macron’s centrist party.

The euro lost some ground against the dollar on Monday afternoon, trading just below $1.12 and trimming its earlier gains.

Sectors were mostly in positive territory, with autos up nearly 1.5%, getting a boost from the news that Fiat Chrysler and Renault are in early merger talks.

Renault surged to the top of the European benchmark after Fiat confirmed it had filed a proposal for a merger with its French rival. In a press release, Fiat said the joint organization would produce estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer.

Shares of Fiat Chrysler rose 8%, while Renault surged almost 12% higher.

French automaker Peugeot Citroen’s shares fell more than 3% on the back of the news, making it the worst performer in the European autos sector.

Elsewhere, trade tensions continued to be a focal point for investors. The billionaire founder of Chinese telecoms giant Huawei, Ren Zhengfei, told Bloomberg on Sunday that despite Beijing’s heated trade war with the U.S., he would oppose any Chinese retaliation against major rival Apple.

Meanwhile, U.S. President Donald Trump on Monday put pressure on Japan to have the balance of trade between the two countries “straightened out rapidly.” Trump has threatened to hit the country’s automakers with high tariffs.