Morning Bid: The euro has a France problem

On Monday, the dollar gained strength, buoyed by elevated Treasury yields despite an underwhelming jobs report, which has diminished hopes for an imminent Federal Reserve rate increase. The euro suffered, hitting a 17-month low and declining 0.7%, as France's fiscal issues and political stalemate loomed, especially as France prepares for next year's presidential election.

The widening chasm between French and German bond yields raises apprehensions that the financial turbulence might propagate across Europe. Conversely, equities were buoyed; European markets anticipate a robust start, while MSCI’s Asia-Pacific index beyond Japan rose by 1%, and Japan's Nikkei surged by 2.5%. The Federal Reserve's potential rate hike in October now carries a less than 20% probability, though a December increase remains a distinct possibility.

Prime Minister Sanae Takaichi, in Japan, is expected to propose a responsive strategy to any unforeseen economic or market scenarios during an extraordinary parliamentary session. Meanwhile, in Brazil, investors brace for a significant market response after Flavio Bolsonaro, a right-wing senator, outperformed expectations in Sunday's first-round presidential vote and will vie against incumbent leftist President Luiz Inacio Lula da Silva in a runoff later this month.

On Monday, investors will monitor key economic indicators: the September S&P services and composite PMIs for France and Germany.