Euro Hits 17-Month Low on France Debt Fears
The euro sank to a 17-month low on Monday as investors reacted to France's worsening fiscal outlook. The common currency dropped more than 0.8% to $1.1161 in Asian trading before partially recovering to $1.1178. Concerns over France's high debt levels and political instability ahead of next year's presidential election have weighed heavily on the euro, which lost about 2.5% last month.
Bart Wakabayashi, branch manager at State Street in Tokyo, noted that "we're starting to see some cracks in overall euro sentiment." The premium for holding French 10-year bonds over German bonds surged above 150 basis points on Friday, raising fears of broader market spillover. French OAT futures fell 0.23%, while German bund futures rose 0.1%.
Asian stocks, meanwhile, advanced as investors scaled back expectations of a Federal Reserve rate hike this month. Data showing slower-than-expected US job growth in September further reduced the likelihood of an October rate hike. Japan's Nikkei climbed 2%, and MSCI's Asia-Pacific index rose 0.9%. US Treasury yields retreated slightly, with the 10-year yield at 5.2686% and the 2-year yield at 4.8101%.
Elsewhere, oil prices dipped as increased Middle East crude exports and G7 stock releases offset concerns about Gulf oil infrastructure damage. Brent crude fell 0.5% to $101.75 per barrel, and US crude slid 0.9% to $90.29 per barrel. Spot gold also declined, dropping 0.24% to $4,132.33 an ounce.