Global Economy
Global Bond Selloff Hammers European Stocks; Wall Street Futures Edge Higher
European equities tumbled Thursday as a relentless global bond selloff pushed sovereign yields to multi-decade highs, while Wall Street futures pointed to a modestly positive open. The CAC 40 led declines in Paris after France unveiled a 2027 budget targeting €43 billion in savings, sending French 10-year yields to 4.96% — the highest since 2002 — and widening the OAT-Bund spread to 133 basis points. U.S. 10-year Treasuries breached 5.34% and U.K. 30-year Gilts topped 6%, reflecting persistent inflation fears fueled by Middle East energy shocks. The ECB faces renewed pressure to hike rates as eurozone inflation surprises to the upside.
Listen to this article
Unlock audio versions of premium articles and more with a Pro subscription.
Global financial markets diverged sharply on Thursday as a vicious bond-market rout pummeled European equities while U.S. index futures signaled a cautious rebound.
Wall Street Futures Point Higher
Pre-market indicators suggested a steady open for the Dow Jones Industrial Average (+0.03%), with the S&P 500 up 0.18% and the tech-heavy Nasdaq 100 gaining 0.46%. The relative resilience stateside contrasted with the carnage across the Atlantic.
Europe Bears the Brunt
- CAC 40 (Paris): -0.89% at 7,893.57 points (11:28 GMT)
- DAX (Frankfurt): -0.30%
- FTSE 100 (London): -1.23%
- Euro Stoxx 50: -0.65%
- FTSEurofirst 300: -0.76%
- Stoxx 600: -0.78%
The common denominator: soaring sovereign yields. Investors are demanding higher compensation for holding government debt as public debt levels remain elevated and inflation accelerates, partly driven by the Iran conflict's impact on energy prices.
France in the Crosshairs
Paris traded with particular volatility after Prime Minister Élisabeth Borne's government presented a 2027 draft budget targeting €43 billion in savings. The plan leans heavily on pension reforms (€5.5 billion), civil-service wage restraint, local-authority budgets, and healthcare spending cuts.
The market reaction was swift. The French 10-year OAT yield spiked to 4.9629% — its highest since 2002 — before paring some gains. The OAT-Bund spread, a key gauge of France's risk premium over Germany, widened to 133 basis points, a level unseen since the eurozone crisis of May 2012.
Economy Minister Roland Lescure sought to calm nerves, insisting French paper "sells well" and the sovereign signature remains solid. But analysts warn the risk is becoming structural. "Once a risk persists long enough, it stops being an event and becomes a characteristic," said Fidel Martin, president of Exoé. "A structurally priced French risk premium could spread well beyond sovereign debt."
A Global Phenomenon
The pain is not uniquely French. Benchmark yields punched through psychological barriers worldwide:
- U.S. 10-year Treasury: 5.34% — highest since 2002
- U.K. 30-year Gilt: >6% — highest since 1998
Inflation Fears Keep Central Banks Hawkish
September CPI data surprised to the upside across major eurozone economies — France, Germany, Italy, and Spain — driven by energy-cost pass-through from the Iran war. The data intensifies the case for another ECB rate hike, even as growth risks mount.
With reporting from Reuters.