Morning Bid: The euro has a France problem

A look at the day ahead in European and global markets from Rae Wee

The dollar charged higher on Monday, drawing support from still-lofty Treasury yields even after a weaker-than-expected jobs report dampened expectations of a Federal Reserve rate hike this month.

The move higher in the greenback came at the expense of the euro, which plumbed a 17-month low and traded 0.7% lower, with the common currency weighed down by fiscal concerns in France.

French markets are under growing pressure from high debt levels and political gridlock ahead of next year's presidential election. The widening gap between French and German bond yields is also raising concerns that the turbulence could spread more broadly across European markets.

Elsewhere, stocks were upbeat, with markets in Europe also set for a strong start.

Trading in the Asia session was thinned given holidays in China, South Korea and Australia's New South Wales, though MSCI's broadest index of Asia-Pacific shares outside Japan advanced 1% and Tokyo's Nikkei was up 2.5%.

Investors are now pricing in less than a 20% chance that the Fed could raise rates in October, though a move in December remains very much on the table..

In Japan, the 30-year government bond yield rose to a record high, ahead of remarks from Prime Minister Sanae Takaichi at the opening of an extraordinary parliamentary session later in the day.

The Nikkei newspaper said last week that she is expected to pledge a nimble response to any unexpected developments in the economy and financial markets.

In Brazil, investors were gearing up for a strong market reaction after right-wing senator Flavio Bolsonaro outperformed expectations in Sunday's first-round presidential vote and secured a runoff against leftist President Luiz Inacio Lula da Silva later this month.

In other news, the International Monetary Fund said late on Sunday it had reached a staff-level agreement with Sri Lanka on the seventh review under the Extended Fund Facility, unlocking about $345 million in financing.

Key developments that could influence markets on Monday:

- France, Germany S&P services PMI (September)

- France, Germany S&P composite PMI (September)

- Euro zone producer prices (August)

(Editing by Shri Navaratnam)