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U.S. stocks slightly lower early

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Deepening French political crisis weighs on euro

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Gold extends rally

By Caroline Valetkevitch

NEW YORK, Oct 7 (Reuters) -

Major stock indexes edged lower on Tuesday, with the S&P 500

easing after recent record highs, and investors eyeing political

upheaval in France, Japan and a U.S. government shutdown, while

gold futures hit $4,000 an ounce for the first time.

Gold's rally has been driven in part by uncertainty over the

U.S. shutdown. U.S. gold futures for December delivery

were up 0.6% at $3,998.50, after hitting a high of $4,009.00.

The euro fell against the U.S. dollar for a second

day as investors awaited developments in France, where the shock

resignation

of Prime Minister Sebastien Lecornu on Monday raised

concerns about the country's fiscal outlook.

The week-old U.S.

government shutdown

continued, but major U.S. stock indexes have been posting

record closing highs, helped by optimism over the likelihood of

interest rate cuts from the Federal Reserve and over artificial

intelligence-related dealmaking.

"With tech stocks and stocks being at all-time highs and

gold being at all-time highs, something has to give," said Jake

Dollarhide, chief executive officer of Longbow Asset Management

in Tulsa, Oklahoma.

"So are the nervous Nellies of gold right, or is the AI

trade correct?... That's what we're going to find out in the

weeks and months ahead."

The Dow Jones Industrial Average fell 71.17 points,

or 0.15%, to 46,623.80, the S&P 500 fell 2.72 points, or

0.05%, to 6,737.17 and the Nasdaq Composite rose 13.38

points, or 0.05%, to 22,952.54.

MSCI's gauge of stocks across the globe fell

1.38 points, or 0.14%, to 994.68.

The pan-European STOXX 600 index fell 0.02%.

Paris' CAC 40 was last up 0.1%, having posted its

largest one-day fall since late August on Monday.

President Emmanuel Macron, who is facing growing pressure to

hold snap

parliamentary elections

, or even resign, has given Lecornu a chance to hold

last-ditch talks

with members of various parties on Tuesday to seek a way

out of the crisis.

French bond yields rose 2 basis points to

3.59%.

In Japan, investors snapped up a sale of

government debt

, in a sign of easing nervousness after

Sanae Takaichi

, a proponent of low rates and high spending, was elected

leader of the ruling party, prompting a selloff in domestic

bonds and the currency and sending stocks to record peaks.

The Japanese yen weakened 0.53% against the greenback

to 151.15 per dollar, while the euro was down 0.44% at

$1.1657.

Benchmark U.S. yields edged lower

as investors awaited

an auction of three-year notes and comments from Fed

policymakers ahead of the U.S. central bank's meeting later this

month. The yield on benchmark U.S. 10-year notes

fell 1.8 basis points to 4.144%, from 4.162% late on Monday.

Oil prices were lower. U.S. crude fell 0.63% to

$61.31 a barrel and Brent fell to $65.02 per barrel,

down 0.69% on the day.

Investors also digested news that the

World Bank

lifted its forecasts for Chinese growth in 2025 and those

for much of the region, although it warned of slowing momentum

next year.

(Additional reporting by Amanda Cooper in London and Rae Wee;

Editing by Christopher Cushing, Kim Coghill, Louise Heavens,

Alexandra Hudson and Sharon Singleton)