As markets took fright on Friday, they were jumpy about pretty much anything that smelt of slowdown or recession, with high-yield credit markets also wobbling.
With chip giant Nvidia preparing to release earnings on Wednesday, there was attention paid to a TD Cowen research report saying Microsoft was cancelling leases for AI data centers - a trend that has been such a part of the economic resilience of the past two years.
Anxiety was increased further by reports that Chinese researchers had discovered a bat coronavirus with similar features to the one that caused COVID-19 and raised the possibility that it could spread to humans. Shares in Moderna climbed 5.3% on the news.
On top of all that, Berkshire Hathaway on Saturday reported record annual profits and boosted its cash stake to $334.2 billion, as Warren Buffett used his annual shareholder letter to caution Washington to spend money wisely and take care of those who get the "short straws in life."
In Europe, all the attention was on the German election fallout and tentative hopes the new parliament will have enough support to loosen Germany's restrictive "debt brake" and lift defense spending.
Germany's blue-chip index jumped 0.8%, boosted by arms makers, while the mid-cap index surged 2.3% and small caps advanced 1.1%.
Defence stocks Rheinmetall, Hensoldt and Renk advanced between 3.3% and 4.3% on prospects of higher military spending by the incoming administration in Berlin. The European aerospace and defence index rose 0.9%.
Germany's 10-year bond yield, which serves as the benchmark for the wider euro zone, was last up just 1 basis point at 2.465%.
Merz vowed on Monday to quickly form a government after winning a national election but faces tricky coalition talks, difficult parliamentary maths and the prospect of an obstructive Bundestag after far-right and far-left parties gained ground.
But Merz also made clear he felt Europe could no longer rely on the United States for economic or security support.
"I would never have thought that I would have to say something like this in a TV show but, after Donald Trump's remarks last week...it is clear that this government does not care much about the fate of Europe," Merz told German public broadcaster ARD.
