Stock indexes mostly gain amid AI deal optimism; euro, yen weaken on fiscal worries

By Caroline Valetkevitch NEW YORK (Reuters) -Major stock indexes mostly rose on Monday, with the S&P 500 and Nasdaq posting record closing highs after news of AMD's artificial intelligence chip-supply deal with OpenAI, while the yen and euro weakened against the dollar after Japan's ruling party elected a new leader and France's new government quit. Bitcoin hit a record high as investors increasingly sought alternative assets and uncertainty prevailed with the U.S. government shutdown. The world's largest cryptocurrency was last up 2.05% at $125,295.33.  The euro was last down 0.26% at $1.171 . New French Prime Minister Sebastien Lecornu resigned on Monday, barely 14 hours after appointing his cabinet. The yen weakened after Japan's ruling party picked conservative Sanae Takaichi, putting her on course to become the nation's first female prime minister. She is an advocate of late premier Shinzo Abe's "Abenomics" strategy to boost the economy with aggressive spending and easy monetary policy. The yen was down 1.93% against the greenback. AI-related dealmaking boosted sentiment in equities, with AMD shares jumping 23.7% and other chip companies' stocks also rising. The Philadelphia Semiconductor Index gained 2.9%. Crypto-related firms such as Coinbase also rose. But Wall Street indexes ended mixed, with the Dow slightly lower as the U.S. federal government shutdown dragged on for a sixth day. The shutdown has postponed the release of key economic indicators. "The market is extending its momentum bias. It's shrugging off the (U.S.) government shutdown and, because of that, there's a belief that perhaps the Fed is going to be more generous than the market previously expected," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. The Federal Reserve is widely expected to cut interest rates again by 25 basis points at its October 28-29 meeting, following data that shows a weakening labor market. Moreover, Cardillo said, "We're not far away from third-quarter earnings, and it looks as though it'll be another good earnings season." Earnings season for S&P 500 companies unofficially kicks off next week with reports from some big U.S. banks. The Dow Jones Industrial Average fell 63.31 points, or 0.14%, to 46,694.97, the S&P 500 rose 24.49 points, or 0.36%, to 6,740.28 and the Nasdaq Composite rose 161.16 points, or 0.71%, to 22,941.67. MSCI's gauge of stocks across the globe rose 2.85 points, or 0.29%, to 996.06.The pan-European STOXX 600 index fell 0.04%. French political instability has ramped up since Emmanuel Macron's re-election in 2022, with no party or grouping holding a parliamentary majority. In Japan, Takaichi beat the more moderate Shinjiro Koizumi in the Liberal Democratic Party's leadership vote. Short-dated Japanese government bond yields slid to a two-week low as traders pared bets on when the Bank of Japan will resume raising interest rates. "There's a little bit more focus on the back end of the curve now, just given that Takaichi is generally seen as a follower of Abenomics. The market expects a little bit more fiscal stimulus there," said Sarah Ying, head of FX strategy, FICC Strategy at CIBC Capital Markets in Toronto. Gold surged to an all-time high above $3,900 per ounce, helped in part by the economic and political uncertainty in the U.S., France and Japan. Spot gold was up 1.85% at $3,957.78 an ounce. Benchmark U.S. Treasury yields edged higher as the shutdown left investors without key economic data. The yield on the benchmark U.S. 10-year Treasury note was last up 4.7 basis points to 4.166% Oil prices also rose after OPEC+'s planned production increase for November was more modest than expected. U.S. crude gained 81 cents to settle at $61.69 a barrel, while Brent climbed 94 cents to settle at $65.47. (Additional reporting by Karen Brettell in New York, Kevin Buckland in Tokyo and Lucy Raitano in London; editing by Alison Williams, Nick Zieminski, Richard Chang and Cynthia Osterman)

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