UPDATE: Global markets are showing signs of stabilization today, despite significant political upheaval in France, Japan, and the US. Investor sentiment remains cautiously optimistic over potential US interest rate cuts, which are expected to provide a much-needed boost to the economy.
In Europe, stocks dipped as the euro fell for a second consecutive day, trading at $1.168. This comes as the political crisis deepened following the shocking resignation of Prime Minister Sebastien Lecornu on October 2, throwing France, Europe’s second-largest economy, into turmoil. Investors are awaiting urgent talks called by President Emmanuel Macron to navigate the crisis.
The ongoing US government shutdown, now one week old, continues to loom large over market sentiment, with little indication of resolution. Meanwhile, in Japan, recent elections have sparked renewed interest in government debt, easing investor anxiety after the election of Sanae Takaichi as leader of the ruling party.
Despite these political challenges, global stocks remain near record highs, buoyed by optimism surrounding potential rate cuts from the US Federal Reserve and a surge in AI-driven investments following a major chip-supply agreement between AMD and OpenAI. Economist Chris Scicluna from Daiwa Capital stated, “The fundamental narrative is still one of Fed rate cuts…coupled with the AI story, should sustain demand for risk assets.”
The dollar strengthened by 0.3 percent against a basket of currencies, primarily driven by gains against the euro and the yen, which is struggling at two-month lows, now trading below 150 yen per dollar. Finance Minister Katsunobu Kato cautioned about the risks of excess volatility affecting the yen. “The yen looks likely to remain under pressure for some time,” he warned.
On the European market, the STOXX 600 index fell 0.2 percent, while Paris’ CAC 40 dipped 0.3 percent, following its most significant one-day decline since late August. French bond yields rose to 3.59 percent, reflecting increasing investor concern.
US stock futures indicated a slight dip of 0.1 percent as the market prepares for a potentially softer opening. The World Bank has also revised its growth forecasts for China for 2025, signaling a more optimistic outlook for the region despite warnings of slowing momentum in 2026.
In commodities, oil prices steadied, with Brent crude trading at $65.58 per barrel, while gold reached a record high of $3,977.19 per ounce. Meanwhile, bitcoin remains just shy of its peak at $126,223.
As political developments unfold, investors will be closely monitoring the situation in France and the ongoing impacts of the US government shutdown. The next few days will be crucial in determining the trajectory of global markets. Stay tuned for more updates as this story develops.
