Markets wrap: World shares mixed, dollar advances amid improved US manufacturing, French political drama

Stocks in the US and Europe were mixed on Monday, while the dollar gained versus the euro, amid political turmoil in France and positive signals for the U.S. economy.

French equities finished little changed in choppy trading after politicians there planned a no-confidence motion against Prime Minister Michel Barnier, a move likely to cause the French government to collapse this week. Broader European shares .STOXX pulled back on the news but still finished the day up 0.66% on the day.

In the US, data showed manufacturing contracted at a moderate pace in November, with orders growing for the first time in eight months and factories facing significantly lower prices for inputs. More economic data is expected this week, including the key monthly jobs report on Friday.

Wall Street stocks were mixed, with a boost from technology shares such as Facebook parent Meta Platforms and Amazon.com, which gained 3.2% and 1.4%, respectively, although Intel fell 0.5% after the faltering American chipmaker announced CEO Pat Gelsinger's retirement.

The Dow Jones Industrial Average fell 0.29% to 44,782, the S&P 500 rose 0.24% to 6,047 and the Nasdaq Composite rose about 1% to 19,403.

“We are seeing a bit of a reversal of the last few weeks with tech leadership returning and rallies in financials and cyclicals pausing," John Belton, portfolio manager at Gabelli Funds in New York, said in an email.

Belton added that data points released over the weekend suggested Black Friday spending was above expectations, with particular strength seen in e-commerce sales.

The euro sank around 0.75% to $1.0498, as the dollar got a boost over the weekend as US President-elect Donald Trump warned BRICS emerging nations against trying to replace the greenback with any other currency.

The euro has lost 14% over three months, partly on concern the euro zone economy might need deeper interest rate cuts than expected from the European Central Bank.

Amid the political drama in France, the risk premium that investors demand to hold French government debt jumped. The gap between France and Germany’s 10-year bond yields - a measure of French borrowing costs compared with the euro zone benchmark - rose about 7 basis points to 87 bps, although it remained below last week's 12-year high of 90 bps.

"Heightened political uncertainty could also play a role at the margin in keeping alive market expectations for larger 50 bps ECB rate cut this month although the hard economic data is not fully supportive," MUFG currency strategist Lee Hardman said.

Global stocks edged higher, leaving the MSCI All-World index  up about 0.3%.

Dollar, US bond yields firm

The Federal Reserve is in focus and Friday's monthly payrolls report could be the deciding factor when policymakers consider whether to cut rates again on Wednesday, 18 December.

A number of Fed officials are due to speak this week, including Fed Chair Jerome Powell on Wednesday. Traders put the odds of a quarter-point reduction at about 60%.

Fed Governor Christopher Waller said on Monday he was inclined to cut the benchmark interest rate as monetary policy remained restrictive enough to keep putting downward pressure on inflation, while the labor market was roughly in balance, something the Fed wants to maintain.

In Treasury markets, the yield on benchmark U.S. 10-year notes was flat on the day at 4.194%.

That has left the dollar index, which measures the currency against six others, up 0.33% at 106.39, having gained 1.8% in November.

In Asia, mainland Chinese shares closed up 0.8%, following a robust reading in a private manufacturing survey on Monday.

The yen, meanwhile, was steady near Friday's six-week high of 149.47.

Gold slipped 0.6% to $2,637 an ounce, under pressure from the strong dollar, after sliding more than 3% in November, its worst monthly performance since September 2023.

Oil prices were steady, as optimism around strong factory activity in China was largely offset by concerns the Fed will not cut U.S. rates again at its December meeting.

In cryptocurrencies, bitcoin fell 1.88% to $95,619.00.

(Reporting by Lawrence Delevingne in Boston and Amanda Cooper in London. Additional reporting by Kevin Buckland in Tokyo and Ankur Banerjee in Singapore; Editing by Shri Navaratnam, Ed Osmond, Jan Harvey, Alexander Smith, Gareth Jones, Jonathan Oatis and David Gregorio)