As Dollar Slips, Global Markets See Widespread Gains

Global stock markets rallied on Monday, propelled by a broad weakening of the U.S. dollar that helped offset investor concerns over political instability in several key economies.

The dollar’s decline, which boosts the value of overseas earnings, provided a powerful tailwind for equities worldwide. This positive momentum was largely driven by the growing expectation of an imminent interest rate cut from the U.S. Federal Reserve, a prospect that solidified following weaker-than-expected labour data for August and pushed Treasury yields lower for a fourth consecutive session.

Despite the upbeat global tone, political shocks created localized turmoil. In Argentina, the peso plunged to a record low and stocks fell over 10% after President Javier Milei’s party suffered a heavy election defeat.

Similarly, Japan faced instability as the yen fell against the dollar following the resignation of Prime Minister Shigeru Ishiba, which raised expectations for a dovish successor.

France’s political landscape also remained fragile, with Prime Minister François Bayrou at risk of defeat, raising concerns about the economic future of the eurozone’s second-largest economy.

Elsewhere in Asia, Indonesian stocks gave up early gains to finish lower even as the rupiah strengthened, following a cabinet shake-up that ousted Finance Minister Sri Mulyani Indrawati.

Amid this mixed political backdrop, market benchmarks told a unified story of gains. MSCI’s global stock index rose 0.35% to 959.07, while the pan-European STOXX 600 index advanced 0.28%.

Emerging market stocks gained 0.58%, and in Asia, MSCI’s Asia-Pacific index climbed 0.67%. Japan’s Nikkei jumped 1.45%, seemingly insulated from its domestic political news. U.S. markets were mixed; the Dow Jones Industrial Average ended slightly lower, while the S&P 500 and Nasdaq rose 0.31% and 0.82% respectively as investors awaited key economic data later in the week.

In commodities, the dovish Fed outlook supported a modest recovery in oil prices and sent gold surging past $3,600 an ounce.