US stocks traded mixed on Monday as fading bets on a Federal Reserve rate hike cushioned broader sentiment, even as Treasury yields and oil prices stayed elevated. The euro slid to a 17-month low on worries over France's fiscal position, while Brazilian markets surged after a right-wing candidate outperformed poll predictions in the first round of the presidential election.
The Dow Jones Industrial Average fell 0.57% on Monday. The S&P 500 rose 0.14%. The Nasdaq Composite added about 0.5%. Easing expectations for a Federal Reserve rate increase helped cushion broader sentiment, even though Treasury yields and oil prices remained elevated.
Concerns over France's fiscal position pushed the euro to a 17-month low. Europe's pan-regional STOXX 600 index edged up 0.15%. Paris shares, however, fell about 1.1% to six-month lows. Brazilian stocks, meanwhile, rallied after Senator Flavio Bolsonaro outperformed poll predictions in the first round and advanced to a runoff against leftist incumbent Luiz Inacio Lula da Silva. The iShares MSCI Brazil ETF jumped about 14% as the Brazilian real surged against the dollar.
France weighs on the euro
The euro recovered some ground to trade at $1.119. It had fallen as much as 0.8% earlier in the session to a 17-month low of $1.1160, down about 2.5% over the past month, as investors fret over France's rising debt and political gridlock ahead of next year's presidential election. The premium investors demand to hold French 10-year bonds over safer German debt surged above 150 basis points on Friday, fueling concerns of broader contagion across European markets.
According to Reuters: "France is the real deal in terms of risk premia for the euro," said Saxo strategist Neil Wilson, who noted that French government plans to reduce the budget deficit still face parliamentary scrutiny.
French 10-year yields stayed below Friday's peak of 4.993%, while German yields were little changed. The euro's slide also lent support to the dollar index. The gauge rose 0.4% on the day. Benchmark 10-year US Treasury yields ticked up 2.5 basis points to 5.3%. Two-year yields, meanwhile, slipped to 4.818%.
Fed repricing offers support in Asia
Trading was thin in Asia because of holidays in China, South Korea and Australia's New South Wales, though regional markets took their cue from Wall Street's gains on Friday following weaker-than-expected US labor data. Figures released last week showed US job growth slowed more than expected in September, with payrolls for the previous two months revised sharply lower, prompting investors to largely rule out a Fed rate increase this month.
Japan's Nikkei rose 2.4%. The MSCI index of Asia-Pacific shares outside Japan, meanwhile, rose 1.2%. Investors now see an 18% chance of a Fed rate increase this month, down from 64% a week ago, according to CME FedWatch data, though a December move remains largely priced in.
Brent crude futures dropped 0.65% to $101.57 a barrel amid volatile trade tied to potential Middle East supply disruptions. US crude, meanwhile, fell 1.5% to $89.70. Spot gold was little changed at $4,141 an ounce.
Source: Investing.com
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