Nasdaq hits record as dollar and Treasury yields climb, oil prices ease

By Lawrence Delevingne and Danilo Masoni

Oct 5 (Reuters) - United States equities were buoyed by advances in megacap and growth stocks on Monday, as Treasury yields held near multi-year highs, the dollar advanced against the euro, and oil prices relented.

On Wall Street, indexes were supported by heavyweight technology companies such as Nvidia <NVDA.O>, Meta Platforms <META.O>, and Microsoft <MSFT.O>. The Dow Jones Industrial Average was rose 0.3%, the S&P 500 added about 0.7%, and the Nasdaq Composite gained about 1%. 

Concerns over France's fiscal position pushed the euro to a 17-month low and weighed on French assets. Europe's pan-regional STOXX 600 index ticked up 0.36%, although Paris shares fell 0.8% to six-month lows. 

Brazilian stocks and the real currency rallied after right-wing Senator Flavio Bolsonaro outperformed poll predictions in the first round of the presidential election and advanced to a runoff against leftist incumbent Luiz Inacio Lula da Silva. 

MSCI's gauge of stocks across the globe rose 0.7%. 

"Relative equity market calm amid the bond market’s 'perfect storm' is understandable, given accelerating economic growth and the AI boom’s rate insensitivity," Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, said in an email Monday.

Shalett wrote that her team was watching three areas for signs of stress: equity market and earnings revisions breadth; high-yield bond spreads; and US dollar strength along with currency market volatility.

FRANCE WEIGHS ON THE EURO

The euro recovered some ground to trade at $1.121 after falling by as much as 0.8% to a 17-month low of $1.1160.      

The single currency, down about 2.5% last month, has come under pressure as investors fret over France's rising debt and political gridlock ahead of next year's presidential election.

The premium investors demand to hold French 10-year bonds over safer German debt surged above 150 basis points on Friday, fueling concerns of broader contagion across European markets.

"France is the real deal in terms of risk premia for the euro," said Saxo strategist Neil Wilson, noting that French government plans to reduce the budget deficit still face parliamentary scrutiny and could ultimately be watered down.

French 10-year yields stayed below Friday's peak of 4.993%, while German yields were also little changed. 

The euro's slide lent fresh support to the dollar, which also drew strength from elevated Treasury yields. The dollar index rose 0.3%.

The dollar's resilience suggests it "may be too soon to write off" its long-term role, BlackRock Investment Institute strategists wrote in a note on Monday.

They added: "With markets pricing more Fed tightening than we think will materialize, there is limited scope for a sustained dollar bull run."

Benchmark 10-year US Treasury yields jumped 6.8 basis points to 5.34%. Borrowing costs across major economies remain near multi-year highs as deteriorating public finances, heavy debt issuance and elevated energy prices continue to pressure bond markets.  

FED REPRICING OFFERS SUPPORT

Trading was thin in Asia due to holidays in China and South Korea as well as in Australia's New South Wales state, though regional markets took their cue from Wall Street's gains on Friday after weaker-than-expected US labor data.

Figures released last week showed US job growth slowed more than expected in September and payrolls for the previous two months were revised sharply lower, prompting investors to largely rule out a Federal Reserve rate increase this month.

Japan's Nikkei rose 2.4% and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3%. 

Investors now see an 18% chance of a Fed rate increase this month, down from 64% a week ago, according to CME FedWatch data, though a move in December remains largely priced in.

Oil prices fell on Monday after crude exports from the Middle East increased and the Group of Seven nations pledged to boost supplies, though selling was limited by ongoing disruption fears linked to the US-Israeli war on Iran.

Brent crude futures dropped 1.46% to $100.76 a barrel, while US crude was down about 1.4% at $89.81.

Spot gold was little changed at $4,135 an ounce.   

(Reporting by Lawrence Delevingne in Boston, Danilo Masoni in Milan and Rae Wee in Singapore; Editing by Susan Fenton, Aurora Ellis and Nick Zieminski)