Dollar Gains as Euro Sinks to 17-Month Low

Summary

The dollar charged higher as the euro sank to a 17-month low on French fiscal worries, despite a weaker-than-expected US jobs report cutting odds of an October Fed hike. The Nikkei rallied strongly while Japan's 30-year yield hit a record high ahead of remarks from PM Sanae Takaichi. Brazilian markets braced for a strong reaction after Flavio Bolsonaro forced a runoff against Lula. The IMF reached a staff-level deal with Sri Lanka unlocking about $345 million.

Equities

The FTSE 100 closed 0.32% higher at 10,461.95 points on Friday, but fell 2.2% over the week for its steepest weekly decline since April. The index was supported by a retreat in UK government bond yields, with the 10-year gilt yield falling 4.09 basis points to 5.3624% after reaching its highest level since 2007 a day earlier.

IG Group shares fell 22.6% on Friday after the online trading platform cut its 2026 revenue growth forecast, citing weaker market conditions. Shares in peers Plus500 and CMC Markets also fell, declining 5.1% and 4%, respectively.

Glencore rose 3% on Friday after the miner forecast 2026 marketing profit of more than $5 billion, above its long-term guidance following a near-record first half. JD Wetherspoon shares climbed 12.5% after the pub group reported stronger sales growth since July, helped by sunny weather, although it warned of higher costs and closures.

In the US, the S&P 500 gained 0.73% on Friday to close at 7,722.72, while the Dow Jones Industrial Average rose 0.49% to 51,176.96 and the Nasdaq Composite advanced 1.19% to 27,190.86. The gains came after US payrolls increased by just 29,000 in September, well below economists' forecast of 90,000, while previous months were revised sharply lower.

The weaker jobs data reduced expectations of a Federal Reserve rate hike at the end of October. The probability of at least a 25-basis-point increase fell to 22.7% from 24.4% a day earlier and 64.2% a week earlier.

Tesla rose 4.7% on Friday, helping the S&P 500 consumer discretionary index gain 1.4%, while Nvidia added 1.3%. The Russell 2000 gained 0.9%, its strongest daily increase in a month, as rate-sensitive stocks benefited from lower expectations for an immediate rate increase.

Nike fell 3.6% on Friday after forecasting a sharp annual revenue decline because of weaker demand in China. The sportswear company also announced job cuts and plans to reorganise its global business divisions.

Western Digital and Seagate Technology each fell about 10% on Friday after reports that Toshiba plans to double its hard-disk production capacity for AI data centres within fiscal 2027.

Forex & Commodities

The euro fell to a 17-month low early Monday as concerns over France’s fiscal position and political gridlock weighed on the currency. The euro was down at $1.1176, while sterling also fell to $1.3205. The yen traded at 157.92 per dollar, while the US dollar index rose to 102.37.

French bond market weakness continued to pressure the euro, with the premium on French 10-year borrowing costs over Germany reaching 140 basis points at the end of last week. The spread had risen by 34 basis points over the week, its largest increase in 17 years.

US jobs data provided a fresh development for Federal Reserve expectations. September job growth slowed more than expected and previous payrolls were revised lower, with markets now pricing an 18% chance of a Fed rate hike in October, down sharply from the previous week, while the probability of a December hike remained 88%.

Spot gold fell 0.3% to $4,132 an ounce early Monday as the dollar strengthened, although softer US labour data limited the decline. Gold remained supported by reduced expectations of an October Fed hike.

Oil prices slipped early Monday as higher Middle Eastern crude exports and the G7's planned release of 100 million barrels from emergency reserves increased supply. Brent fell to $101.59 a barrel, while WTI was $90.12.

Brent remained above $100 as attacks on commercial vessels continued and Yemen's Saudi-backed government launched a military campaign against the Iran-backed Houthis. Saudi Aramco also cut November crude prices for Asia to six-year lows.