LONDON: Stock markets diverged Monday as a deepening political crisis in France sent Paris into a tailspin while a new Japanese ruling party leader buoyed shares in Tokyo.
Gold pushed ever closer to $4,000 an ounce as the US government shutdown and expected interest cuts from the Federal Reserve boosted the precious metal's attractiveness.
The euro fell against main rivals and French borrowing costs spiked as Sebastien Lecornu, who had been prime minister for less than a month, resigned just 14 hours after naming a largely unchanged cabinet.
France's "fractured parliament is making it nearly impossible to pass a budget that reduces the fiscal deficit", said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.
"With government borrowing running at more than five percent of GDP and the debt ratio rising, the risk premium on French government bonds will continue to widen," he added.
Shares in French banks BNP Paribas, Societe Generale and Credit Agricole all shed around three percent in afternoon trading.
The London and Frankfurt stock exchanges, however, were up in afternoon deals.
On Wall Street, both the S&P 500 and tech-heavy Nasdaq Composite sat next to record highs as AI deals overshadowed concerns over a government shutdown that dragged into a second week.
Shares in Advanced Micro Devices (AMD) jumped more than 33 percent after the chipmaker announced a multi-year partnership with OpenAI to develop AI data centres which should bring it tens of billions of dollars in new revenue over the next five years.
In Asia, Tokyo surged almost five percent to a record high and the yen sank on bets the new leader of Japan's ruling party will loosen monetary policy to kickstart the economy.
Sanae Takaichi, likely to become Japan's prime minister this month, has previously backed aggressive monetary easing and expanded government spending.
The yen weakened more than one percent against the dollar and hit a record low against the euro.
Yields on 30-year Japanese bonds rose sharply reflecting fears the country's already colossal debt will balloon further.
After her victory Saturday, Takaichi pledged first to implement measures to address inflation and boost Japan's economy, rural areas and primary industries.
