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

Ankur Banerjee:

Investors will get more political drama as France is all but

certain to start looking for its fifth prime minister in three

years, plunging the euro zone's second-biggest economy into

turmoil.

Francois Bayrou faces a confidence vote on Monday, which he

is expected to lose. While much of the crisis may already be

priced in, a slate of debt rating reviews starting this week

will be a litmus test for France and investors' appetite for the

country's assets.

France's rating was downgraded by Moody's after its previous

government collapsed last year, and a repeat would be a heavier

blow, pushing it to a lower rating and raising the risk of

forced selling of its already pressured bonds.

Last week, France's 30-year government bond yield

hit a level last seen in June 2009 as investors

fretted about the fiscal outlook and ongoing political quagmire.

Speaking of yields, Japanese government bonds were muted on

Monday after Japanese PM Shigeru Ishiba resigned over the

weekend, paving the way for fiscal uncertainty and clouding the

policy path for the Bank of Japan.

The main action was seen in the yen, which dived

across the board but held near the 148 per dollar level. The

soft yen helped push the Nikkei to just below the record

peak touched last month.

Traders aren't sure when the BOJ will next hike rates and

investors are worried that the next PM could well be an advocate

of looser fiscal and monetary policy, such as Liberal Democratic

Party veteran Sanae Takaichi.

All that has muddled what might have been an exuberant

Monday for risk assets after the lousy U.S. jobs report cemented

expectations of a rate cut from the Federal Reserve when it

meets next week.

The only question left to be answered is whether it's a 25

basis point cut or a jumbo 50 basis point cut. The U.S.

inflation report on Thursday will be pivotal in that debate.

Key developments that could influence markets on Monday:

Economic events: Germany industrial data for July