(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

As U.S. markets mull the lengthening government shutdown, the

week started with political drama in Japan and France - with the

yen and euro falling sharply against the dollar and both gold

and the euro/yen exchange rate vaulting to all-time highs.

Sanae Takaichi's shock weekend win to lead Japan's ruling

Liberal Democratic Party and become Japan's next Prime Minister

sent the dollar surging above 150 yen and the Nikkei soaring

almost 5% to new records above 48,000. With Takaichi opposed to

Bank of Japan tightening and a supporter of further fiscal

stimulus, her win has sent long-shaky 30-year Japanese

government bond yields to new record highs and sent Japan's

yield curve to its highest in a month as October BoJ rate hike

bets evaporated.

Just as markets were digesting the news from Tokyo, Prime

Minister Sebastien Lecornu and his government resigned hours

after Lecornu announced a cabinet line-up, making it the

shortest-lived in modern French history and knocking stocks and

the euro lower. With French politics back in limbo and possibly

facing yet another election, the CAC40 French stock index fell

more than 1.5% and euro zone stocks dropped too, with the euro

falling back below $1.17 and 30-year French bond yields popping

higher.

The upshot for U.S. markets that are warily watching the

length of the government shutdown stateside and the looming

earnings season there is that stock futures and the dollar are

higher ahead of Monday's bell and long-term Treasury borrowing

rates are rising again. Irking the bond markets on another bad

day for debt market around the world was a rise in oil prices

after the OPEC+ output rise at the weekend fell short of many

expectations.

* Takaichi is set to be Japan's first woman prime minister.

Her

win saw market bets on a BOJ hike this month falling to less

than 40% from more than 70% last week. Some strategists argue

fears of extreme fiscal loosening or political pressure on the

BOJ may be overdone, but investors will parse early cabinet

signals closely.

* Fed funds futures now imply about a 95% chance of a U.S.

October

cut, and betting markets assign high odds the closure stretches

beyond mid-month and the release of the September consumer price

inflation release - with fears for more job losses and

confidence hits, the longer the hiatus. Riffing off the Fed

hopes, S&P 500 futures edged higher again since Friday's record

close.

* Gold and bitcoin set new records as political upheavals

across

G7 stoked 'hot' inflation concerns and safety bids, with the

main crypto token topping $125,000 for the first time. Bullion

jumped to a record just above $3,944 before easing to around

$3,927, propelled by haven demand and a softer interest rate

policy path. Bitcoin joined the bid for alternatives.

In today's column, I discuss Germany's looming fiscal "sugar

rush".

Today's Market Minute

* Japan's ruling party picked hardline conservative Sanae

Takaichi as its head on Saturday, putting her on course to

become Japan's first female prime minister in a move set to

jolt investors and neighbours.

* The U.S. administration will start mass layoffs of federal

workers if President Donald Trump decides negotiations with

congressional Democrats to end a partial government shutdown are

"absolutely going nowhere," a senior White House official said

on Sunday.

* Trump said on Sunday that talks with Hamas to end Israel's war

in Gaza and release hostages held by the Palestinian militant

group were advancing rapidly.

* OPEC+'s continued oil output increases are eroding the group's

spare production capacity, a vital cushion that has helped to

mitigate volatility in recent years. Energy traders may

therefore face rockier days ahead, writes ROI energy columnist

Ron Bousso.

* The tin market is once again bubbling on supply chain trouble,

this time in Indonesia, where the government has launched a

sweeping clamp-down on illegal mining. Read the latest from ROI

metals columnist Andy Home.

Chart of the day

Sanae Takaichi's surprise weekend win to lead Japan's ruling LDP

and become the next prime minister sank the yen, sent long-term

Japanese borrowing rates soaring and lit a fire under Tokyo

equities. Takaichi is opposed to further Bank of Japan interest

rate rises and, as an ally of former PM Shinzo Abe, is keen on

stimulating the economy further.

Today's events to watch

* New York Fed's September global supply chain index (1000)

* US corporate earnings: Constellation Brands

* European Central Bank President Christine Lagarde and Bank of

Spain Governor Jose Luis Escriva speak; Bank of England Governor

Andrew Bailey speaks

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Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.

(By Mike Dolan; Editing by)