Euro Dips as French Government Faces Historic Collapse

The euro remained weak as political uncertainty in France deepened, with Prime Minister Michel Barnier’s government likely to fall in a no-confidence vote following his use of a constitutional clause to bypass parliamentary approval for a social security bill. Pan-European STOXX 50 futures pointed higher, bolstered by positive sentiment from Wall Street's record highs and upcoming economic data from the US Meanwhile, bets on a Federal Reserve rate cut in December rose to 75%, as markets awaited the US JOLTS job openings report.

Equities

The FTSE 100 rose 0.3% on Monday, closing at a six-week high, supported by a weaker pound, which fell 0.8% against the dollar. However, British homebuilders Vistry Group and Persimmon dropped 3.9% and 1.3% respectively after RBC downgraded their ratings from "perform" to "underperform." Mid-cap FTSE 250 shares remained flat as investors turned their attention to political developments in France.

In the US, the S&P 500 and Nasdaq posted record closing highs, climbing 0.2% and 1% respectively, driven by technology and consumer discretionary stocks. Tesla surged 3.5% after Stifel raised its price target, while Super Micro Computer saw a remarkable 28.7% increase, as the AI server maker began searching for a new finance chief following an accounting review. In contrast, the Dow fell 0.3%.

Tesla rose 3.5% after an analyst raised its price target, while Super Micro Computer surged 28.7% as it began searching for a new CFO. The S&P 500 and Nasdaq posted gains of 0.2% and 1%, respectively, while the Dow fell 0.3%. US investors are now focused on Friday's employment report, with markets expecting a rise in payrolls and a slight uptick in the jobless rate to 4.2%.

Forex & Commodities

Political instability in France, where Prime Minister Michel Barnier faces a no-confidence vote, weighed heavily on the euro, which fell 1% to $1.0469, its largest daily decline since early November. The yield spread between French and German 10-year bonds widened to 87.3 basis points, reflecting rising investor concerns.

The US dollar strengthened against a basket of currencies, gaining 0.3% to 106.33 on robust US manufacturing data. Both the ISM and S&P Global manufacturing PMIs exceeded expectations in November, pointing to resilience in the US economy. Fed Governor Christopher Waller's comments suggesting a December rate cut further boosted expectations, with markets pricing in a 79% chance of a 25-basis-point cut. President-elect Donald Trump's stance on BRICS currencies and tariffs added to the dollar’s gains.

In commodities, gold prices held steady at $2,638.73 per ounce, with investors awaiting US employment data later this week to gauge the Federal Reserve's next steps. Spot silver added 0.2%, while platinum and palladium dipped 0.4% and 0.6%, respectively. Oil prices saw minimal changes, with Brent crude closing at $71.83 a barrel and WTI at $68.10.