Stock market: Europe heads into a new week with all eyes on bonds and oil
(Il Sole 24 Ore Radiocor) - As the new week begins, European stock markets will inevitably continue to keep a close eye on the bond market, following the turbulence that hit spreads on European government bonds over the past week. The markets have, in fact, seen the start of the final quarter of the year marked by heavy pressure on bonds, which will inevitably remain the focus of investors’ attention in the coming trading sessions as well. Over the past week, the yield on the 10-year French OAT has reached its highest level since 2002, whilst the spread against the Bund has returned to the 150 basis point range – a level not seen since the 2011–12 sovereign debt crisis. The same trend, albeit to a lesser extent, affected the Italian BTP, whose spread against the German bond of the same maturity peaked at over 130 basis points on Friday, before narrowing towards the end of trading.
“France, in particular, is suffering from a combination of widening corporate credit spreads, rising yields that are undermining debt dynamics, and worse-than-expected public finance figures,” note the analysts at MPS. “The 2026 deficit stands at 5.4 per cent against expectations of 5 per cent, and the 2027 figure would reach 6.5 per cent in the absence of corrective measures. The proposed budget would reduce it to 5 per cent, but the lack of a majority to support Prime Minister Lecornu increases the likelihood of a third consecutive provisional budget,” they emphasise.
The trend in energy prices also remains in the spotlight, with fears of further inflationary pressures that could result from this. Just today, on the eve of a new trading week, the seven OPEC+ countries have agreed to keep oil production quotas unchanged in November as well. The decision comes as Brent futures have once again risen above the $100-per-barrel mark due to the conflict in the Middle East, which continues to halt large swathes of the group’s production. It is precisely for this reason that, last Friday, the G7 decided on a coordinated release, by the IEA, of 100 million barrels of emergency reserves.
blah-
