Euro slides on France worries; Fed pause hopes support stocks
SPY•The euro fell to a 17-month low of $1.1160 before recovering to $1.1208 as concerns over France’s finances weighed on the currency and French assets. Weaker U.S. jobs data reduced the market-implied chance of an October Fed rate hike to 18% from 64% last week, while the STOXX 600 rose 0.3%.
1. France weighs on euro
The euro fell 0.8% overnight to a 17-month low of $1.1160 before recovering to $1.1208. Investors were concerned about France’s rising debt and political gridlock ahead of next year’s presidential election. France’s 10-year bond yield rose 6 basis points to 4.9196%, while the premium over German bonds had topped 150 basis points on Friday.
2. Markets gain on Fed pause bets
The pan-European STOXX 600 rose 0.3%, while Paris’s benchmark index fell 0.9% to a six-month low. The dollar gained 0.3% to 102.194, supported by the euro’s decline and elevated U.S. Treasury yields. U.S. job growth slowed more than expected in September, and the market-implied chance of an October Fed rate hike fell to 18% from 64% the previous week; traders still expected a December hike.
3. Other markets and commodities
Asian shares gained, with Japan’s Nikkei up 2.4%, and U.S. stock futures were little changed. Oil prices fell, with Brent down 0.8% to $101.39 a barrel and U.S. crude down 1.4% to $89.84, while spot gold rose 0.5% to $4,162.90 an ounce.
