Headlines:
Markets:
- USD leads, JPY lags on the day
- European equities little changed, French stocks slump; S&P 500 futures up 0.3%
- US 10-year yields up 3.3 bps to 4.152%
- Gold up 1.3% to $3,935.26
- WTI crude up 1.4% to $61.76
- Bitcoin up 0.4% to $123,988
Just hours after announcing his cabinet line-up, newly appointed French prime minister Sebastien Lecornu couldn’t take the heat as he and his government resigned this morning in Europe. The political woes in France deepens and it really begs the question, is France on its last legs here?
That as political crisis takes another turn amid a looming debt and financial plight that beckons for Europe’s second largest economy.
The news weighed on the euro during the session as French assets were sold off heavily as well. EUR/USD fell from around 1.1730 to 1.1650 levels on the headlines while the CAC 40 index dropped by over 2% at one point. Meanwhile, French bond yields are surging and we’re even seeing the yields spread between 10-year German and French bonds blow up to nearly its highest since 2012.
The political turmoil here is one that comes after Japan’s own political power shift over the weekend, where Sanae Takaichi was appointed as the country’s first ever female prime minister.
Takaichi is a big fiscal dove and the result has been reverberating through the day, with the Japanese yen holding much weaker as Japanese bond yields shoot higher while the Nikkei posted near 5% gains in a record close juts shy of 48,000.
USD/JPY was up around 149.80 earlier in the day but pushed past the 150.00 mark as buyers look to capitalise on the headlines to mark a technical breakthrough. That as traders are paring back odds of a BOJ rate hike for October and December this year.
As the euro and yen struggle, that’s all underpinning the dollar with the greenback catching bids across the board in European trading.
GBP/USD is down 0.4% to 1.3428 with USD/CHF also up 0.3% to 0.7980, while USD/CAD holds a marginal advance – up 0.1% to 1.3960 on the day.
As major bond markets sell off amid political concerns and the US shutdown still prolonging, gold is once again finding itself in a great spot with prices surging above $3,900. The $4,000 mark looks to a question of when and not if now, as we get things going in the new week. Just be wary of profit-taking at the big level though when the time comes.
In the equities space, French stocks are lagging but US futures are holding higher and that’s keeping the broader risk mood steadier. Tech shares are looking to bounce back after Friday’s setback, making for a more positive start to the new week.
Elsewhere, oil prices are also seeing a modest bump higher to start the week as OPEC+ is reported to raise output by less than feared here over the weekend. WTI crude oil is up 1.4% to $61.76 as we get things going on the week.
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