Nasdaq Rallies to Record Level to Start the Week – Nasdaq up 1.05%
US equity markets moved higher on Monday as investors continued to react positively to Friday’s weaker-than-expected employment report. Technology stocks led the advance, pushing the Nasdaq to another record close. The Dow Jones gained 0.18% to finish at 51,267, while the S&P 500 rose 0.66% to 7,773. The Nasdaq outperformed, climbing 1.05% to a record close of 27,477.
US Treasury yields were mixed across the curve. The policy-sensitive 2-year yield edged 1.3 basis points lower to 4.812%, reflecting the continued reassessment of Federal Reserve rate expectations following the softer labour market data. Further out the curve, however, yields remained under upward pressure, with the benchmark 10-year yield rising 3.0 basis points to 5.303%.
The US dollar strengthened against the major currencies despite the modest decline in shorter-dated Treasury yields. The Dollar Index gained 0.20% to close at 102.13, with much of the move driven by renewed weakness in the euro, which fell to a 17-month low during the session.
Oil prices came under pressure as reports indicated that Middle Eastern exports continue to increase despite the ongoing conflicts across the region, easing some of the market’s immediate supply concerns. Brent crude fell 2.07% to $100.12 per barrel, while WTI declined 2.14% to $89.16. Gold was relatively steady, slipping just 0.05% to $4,140.11 and remaining close to key technical support levels.
Euro in Danger as Debt Concerns Rise
The euro has come under renewed pressure, dropping to a 17-month low below $1.12 against the US dollar yesterday as investors become increasingly concerned about deteriorating government finances across parts of the eurozone. France is currently at the centre of those concerns, but the bigger risk for the single currency is that nervousness begins to spread across the bloc.
France’s fiscal position has moved firmly onto traders’ radar, with government debt expected to approach 120% of GDP this year and rise further in 2027. At the same time, the budget deficit remains above 5% of GDP, leaving Paris facing the difficult combination of high debt, rising borrowing costs and limited political room to deliver substantial spending cuts.
France is also not alone in carrying a heavy debt burden. Data showed government debt at 143.5% of GDP in Greece, 138.9% in Italy, 117.6% in France, 109.1% in Belgium and 101.6% in Spain at the end of Q1 2026.
Bond markets are already reflecting those concerns. The premium investors demand to hold French 10-year debt rather than German Bunds recently surged towards 160 basis points, around levels not seen since the eurozone sovereign debt crisis. More importantly for FX markets, pressure has begun spreading into other European bond markets, including Italy and Belgium.
For the euro, the key concern is therefore shifting from France itself to potential contagion. If investors increasingly demand higher risk premiums across heavily indebted eurozone economies, the ECB could face an uncomfortable balancing act between controlling inflation and preventing tighter financial conditions from destabilising sovereign debt markets. That combination could leave the euro vulnerable to further downside, particularly while US yields and the dollar remain elevated.
The EURUSD found a base yesterday at 1.1160 before retracing some of its fall, and that will now provide the short-term support level, with the next target the May 2025 low at 1.1060. Resistance now sits on previous support levels just above 1.1300, and traders will be looking to sell into any rallies towards there while the current conditions continue.
Quiet Calendar Day Ahead for Traders
The macroeconomic calendar is relatively quiet again today. Chinese markets remain closed for a bank holiday, while attention during the latter stages of the Asian session will turn to comments from Bank of Japan Governor Kazuo Ueda when he speaks at the National Securities Conference. Yen traders will be watching closely for any fresh signals on the outlook for Japanese monetary policy and potential intervention.
There is nothing of note scheduled in the London session, and the North American calendar is also light, with Canadian Ivey PMI data (exp. 65.2) the only notable data release, and we hear later in the day from Fed members Bowman and Schmid. In the absence of major economic releases, geopolitical developments are likely to remain an important driver of sentiment across currencies, commodities and broader risk markets as the trading day progresses.
