FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., August 19, 2025. REUTERS/Brendan McDermid/File Photo

By Sinéad Carew and Alun John

NEW YORK/LONDON (Reuters) - MSCI's global equities gauge rose on Monday, while U.S. Treasury yields declined with the dollar on the prospects of lower interest rates and investors around the world grappled with political uncertainty in countries from Japan and Indonesia to France and Argentina.

A heavy election defeat for Argentina President Javier Milei's ruling party in Buenos Aires province sent the Argentine peso to a record low.

In afternoon trading, the peso fell 3% against the dollar, while the benchmark stock index [.MERV] fell 13.25% and an index of Argentine stocks traded on U.S. exchanges [.BKAR] lost 18.6%. Some of the country's international bonds saw their biggest falls since they began trading in 2020 after a $65 billion restructuring deal.

Japanese Prime Minister Shigeru Ishiba resigned on Sunday, ushering in a potentially lengthy period of uncertainty at a shaky moment for the world's fourth-largest economy, prompting the yen to fall against the dollar.

France's fourth prime minister in less than two years, Francois Bayrou, lost a confidence vote on Monday, and parliament brought down the government in the euro zone's second-largest economy over its plans to tame the ballooning national debt, deepening a political crisis.

And in Indonesia, stocks gave up early gains to finish down more than 1%, while the rupiah rose after Finance Minister Sri Mulyani Indrawati was ousted in a cabinet shake-up.

U.S. investors were focused on the prospects for easier monetary policy, however, after Friday's weaker than expected U.S. labor data for August appeared to seal the case for a Federal Reserve interest rate cut this month.

"We had a pretty disappointing employment report on Friday. This week, it's all about inflation," said Ameriprise chief market strategist Anthony Saglimbene.

"Markets are kind of looking past some of the weaker economic data because it likely means that the Fed is going to have more space to cut interest rates this year."

GLOBAL STOCK INDEX RISES

MSCI's gauge of stocks across the globe rose 3.67 points, or 0.38%, to 959.38.

Earlier, the pan-European STOXX 600 index closed up 0.52%.

"The weakening dollar against most currencies is boosting returns in foreign stock indices," said Gene Goldman, Chief Investment Officer at Cetera Investment Management in the U.S.

"There are country-by-country concerns. But a lot of news in France is priced in and Japan's prime minister could be replaced by a much more dovish, market-friendly prime minister."

On Wall Street, the Dow Jones Industrial Average closed up 114.09 points, or 0.25%, to 45,514.95, the S&P 500 rose 13.65 points, or 0.21%, to 6,495.15 and the Nasdaq Composite rose 98.31 points, or 0.45%, to 21,798.70 for a record closing high.

In currencies, the U.S. dollar extended Friday's losses after the jobs report reinforced rate cut expectations, while the yen fell broadly after Japan's political news.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.42% to 97.46. The euro rose 0.36% on the dollar to $1.1759.

Against the Japanese yen, the dollar strengthened 0.04% to 147.44.

Sterling strengthened 0.29% to $1.3545 while the Canadian dollar strengthened 0.17% against the greenback to C$1.38 and the Swedish crown strengthened 0.75% versus the dollar.

In U.S. Treasuries, the prospect of interest rate cuts and optimism that U.S. inflation data due later in the week would be benign pushed down yields for the fourth straight day, to their lowest level since April.

The yield on benchmark U.S. 10-year notes fell 3.9 basis points to 4.047%, from 4.086% late on Friday while the 30-year bond yield fell 7.7 basis points to 4.697% from 4.774%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1 basis point to 3.497%, from 3.507%.

Oil prices regained some of last week's losses, after OPEC+'s output hike was seen as modest and due to concerns over the possibility of more sanctions on Russian crude.

U.S. crude settled up 0.63%, or 39 cents, at $62.26 a barrel and Brent ended at $66.02 per barrel, a rise of 0.79% or 52 cents on the day.

Gold surged past $3,600 an ounce for the first time on Monday, as the soft U.S. labor data reinforced expectations that the Fed would cut interest rates.

Spot gold rose 1.37% to $3,635.26 an ounce. U.S. gold futures rose 0.66% to $3,637.10 an ounce.

(Reporting by Sinéad Carew, Rodrigo Campos in New York, Ankur Banerjee in Singapore and Alun John in London; Editing by Helen Popper, Kirsten Donovan, Kevin Liffey, Ken Ferris and Marguerita Choy)