Global markets were thrown into disarray as political uncertainty in France and changing expectations around U.S. Federal Reserve rate cuts fueled investor unease. French President Emmanuel Macron's call for a snap election, following significant far-right gains in European Parliament elections, added to the already tense atmosphere. The euro plummeted to a one-month low against the dollar, and European markets saw a broad selloff, evidenced by a 0.6% slip in European stocks and a 2% tumble in euro zone bank stocks.

French bank stocks faced severe declines, with Societe Generale and BNP Paribas falling more than 5% and 4%, respectively. The heightened political risk translated into increased yields for French and Italian government bonds. France's 10-year government bond yield rose by 8 basis points to 3.19%, heightening concerns over rising financing costs and fiscal stability.

Meanwhile, the cautious global mood extended to Asia, where thin trading due to public holidays in several major markets resulted in a 0.3% drop in MSCI's index of Asia-Pacific shares outside Japan. The market anxiety was compounded by the upcoming U.S. inflation data and Federal Reserve and Bank of Japan meetings. U.S. stock futures also pointed to a weak opening.

The robust U.S. labor market data further complicated the picture for the Federal Reserve. Last Friday's report showed higher-than-expected job creation and reaccelerated wage growth. As a result, futures markets adjusted their projections to price in fewer rate cuts for the year. The likelihood of easing measures starting in September has become increasingly uncertain, with the Fed's policy decision anticipated on Wednesday.

French President Emmanuel Macron's political gamble by calling a snap election could tilt the balance of power in France's legislature, offering the far-right unprecedented leverage. This development could potentially stymie Macron's legislative agenda and increase the risk premium on European assets.

In commodities, oil prices edged up with Brent crude futures increasing by 0.4% to $79.91 per barrel, while U.S. West Texas Intermediate crude futures gained 0.2% to $75.71 per barrel. Gold prices also saw a modest rise, with spot gold inching up 0.13% to $2,296 an ounce, reflecting ongoing investor caution.

With markets on edge, traders and investors alike are closely monitoring developments. The interplay of U.S. economic data, Federal Reserve policies, and European political dynamics will likely set the tone for global markets in the coming days.