Euro hits 17-month low on French debt and Spain election fears

The euro fell to its lowest level against the dollar in 17 months on Monday, driven by mounting concerns over France's high debt and deficits. The currency closed at $1.1217, down from $1.1256 on Friday, as investors reacted to an underwhelming 2027 budget plan unveiled last week. That plan has fueled worries that French government spending will remain elevated ahead of next year's presidential elections, where far-right candidate Marine Le Pen, viewed as a fiscal populist, has a chance of winning.

French debt is projected to rise to nearly 122 percent of the country's GDP next year, despite planned spending cuts. This trajectory has pushed the 10-year government bond yield to 4.8 percent, the highest level since the 2011 eurozone bond crisis. Patrick Munnelly, market strategist at Tickmill Group, noted that France had already been under pressure due to questions over fiscal credibility and political stability. He added that a call for snap elections in Spain by Prime Minister Pedro Sanchez adds another layer of uncertainty, as lawmakers rejected a housing relief bill from his Socialist-led minority government.

Equities traded broadly higher despite the pressure from elevated bond yields. The tech-focused Nasdaq closed at a new record of 27,477.31 points, up 1.1 percent, driven by advances in artificial intelligence-related stocks. Shares in SpaceX jumped by 7.6 percent, while Meta rose by 1.9 percent. The S&P 500 gained 0.7 percent to 7,773.95, and the Dow Jones Industrial Average rose 0.2 percent to 51,267.90. However, Justin Bergner of Gabelli Funds warned that the market appears increasingly fragile, noting that many view the upcoming period as the official start of earnings season when major banks report results.

In Europe, the Paris CAC 40 index fell 0.8 percent to 7,834.10 points. The decline was influenced by bond yield worries and a nearly 10 percent drop in Schneider Electric shares after the company announced a $22.6 billion all-cash deal to buy US engineering software specialist PTC. The London FTSE 100 rose 0.3 percent to 10,497.94, while the Frankfurt DAX gained less than 0.1 percent to finish at 25,254.21.

Oil prices ended lower after G7 nations and the International Energy Agency agreed to free up 100 million barrels of diesel and crude oil to address supply tightness stemming from the US-Iran conflict. Brent North Sea crude fell 1.9 percent to $100.32 per barrel, and West Texas Intermediate dropped 1.8 percent to $89.43 per barrel. Amin Nasser, chief executive of Saudi Aramco, described oil stockpiles as "scarily thin" as the European winter approaches. Data from maritime tracking firm Kpler showed that Middle East oil exports, excluding Iran, surpassed pre-war levels last week despite attacks on ships in the Strait of Hormuz. Supplies of some products like diesel remain tight due to refineries damaged during the conflict and Ukrainian strikes on Russian energy facilities.

In Asia, the Tokyo Nikkei 225 index rose 2.4 percent to 69,946.86 points, and the Hong Kong Hang Seng Index increased 0.3 percent to close at 24,040.34. The Shanghai Composite was closed for a holiday.