Euro Turmoil Deepens as French Bonds Hit 2009 Yield Highs

France’s political crisis weighed on markets as 30-year bond yields surged to levels last seen in 2009, with investors bracing for a confidence vote that Prime Minister Francois Bayrou is expected to lose. The euro slipped while the yen weakened after Japanese PM Shigeru Ishiba’s resignation, though the Nikkei held just below its record peak. US traders looked ahead to next week’s Fed meeting, with expectations split between a 25 or 50 basis point rate cut.

Equities

The FTSE 100 closed 0.1% lower on Friday, with losses in heavyweight energy and banking stocks outweighing gains in other sectors. Energy shares were a particular drag, as BP fell 2.6% and Shell slipped 2.2%.

Banks also weakened, with HSBC, NatWest, Barclays and Lloyds all among the largest decliners on the index. Admiral Group dropped 2.9% after Peel Hunt cut its rating to “sell” from “reduce”. Entain rose 3.3% after Jefferies lifted its price target.

Homebuilders gained, led by Berkeley, up 3% after reaffirming its profit forecast for fiscal years 2026 and 2027, while rivals Persimmon, Taylor Wimpey, Barratt Redrow and Vistry also advanced. Ashmore slid 4.3% after reporting lower-than-expected fee revenue and weaker profits. Precious metal miners gained, supported by higher gold prices, while industrial miners tracked stronger copper.

Across the Atlantic, US markets closed lower on Friday following the release of August labour market data. The Dow Jones Industrial Average fell 0.5% to 45,400.86, the S&P 500 slipped 0.3% to 6,481.50 and the Nasdaq edged down 0.03% to 21,700.39. Banking stocks saw the sharpest declines, with the S&P 500 bank index ending 2.4% down.

Lululemon Athletica was among the largest individual losers, dropping 18.6% after it cut its profit outlook for the second time in succession. Kenvue fell 9.3% after reports suggested US Health Secretary Robert F. Kennedy Jr. plans to link the use of Tylenol in pregnancy with autism, though the claims were not supported with evidence in the report.

Broadcom surged 9.4% after unveiling a $10 billion artificial intelligence chip order from a new customer and raising its fourth-quarter revenue forecast. Real estate-related shares gained, helped by interest rate expectations, with the Philadelphia Housing Index up 2.1% and the S&P real estate sector finishing 1% higher.

Forex & Commodities

The US dollar weakened late on Friday after labour market data showed non-farm payrolls rose by just 22,000, well below expectations. The dollar slipped to 147.4 against the yen and to 0.7983 against the Swiss franc, while the euro strengthened to 1.1717. Sterling also firmed to 1.3506 after Deputy Prime Minister Angela Rayner resigned, adding pressure on Prime Minister Keir Starmer’s government. US Treasury yields fell sharply following the data, with the 2-year note yield dropping to 3.511% and the 10-year yield to 4.088%.

Gold closed at a record high of 3,599.9 on Friday before steadying early this morning at 3,593.8. The metal has gained strongly this year, supported by central bank demand, with China adding to its reserves for a tenth consecutive month in August. Net long positions in gold also rose to their highest in months, according to CFTC data released over the weekend. Spot silver was last at 40.92, platinum at 1,393, and palladium at 1,123.

Oil prices edged higher this morning as Brent crude rose to 66.30 and US West Texas Intermediate to 62.62. The move followed OPEC+’s decision to raise output by 137,000 barrels per day from October, a slower pace than in recent months. Gains were also underpinned by concerns about additional sanctions on Russian crude after Moscow launched its largest air strike on Ukraine since the start of the war.