European equity markets made a small recovery on Friday, attempting to stabilize after dropping to three-month lows in the previous session. The pan-European STOXX 600 index increased by 0.6% but remained on track for its worst weekly performance since mid-April, with a decline of nearly 2% for the week.
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Germany's DAX rose by 0.9%, France’s CAC 40 gained 0.6%, while London's FTSE 100 remained mostly unchanged. This downturn in October has been attributed to a mass sell-off in European sovereign debt, largely fueled by growing fiscal concerns in France following the unveiling of the government's 2027 draft budget.
France's 10-year OAT yield soared to its highest level since 2002 as investors sought a higher risk premium to manage ongoing French debt issuance. According to Reuters, the yield spread between 10-year French bonds and benchmark German bonds widened beyond 140 basis points, marking the widest gap since the Eurozone sovereign debt crisis in 2012. This fiscal pressure contributed to the euro dipping to its lowest level against the U.S. dollar since 2025.
Market participants are also preparing for the preliminary September Eurozone inflation report, with economists surveyed by Reuters predicting an increase in headline inflation from 3.2% in August to 3.6% in September, driven by rising energy costs linked to the conflict in the Middle East. Attention will also turn to the U.S. employment report, where a strong labor market reading may reinforce the Federal Reserve's ongoing commitment to its "higher-for-longer" interest rate policy, potentially increasing global Treasury yields.
In individual stock news, British online trading platform IG Group saw a decline of up to 27.2%, reaching its lowest point since April 2025, after announcing an expected third-quarter revenue of approximately £240 million, a 14% decrease from the previous year, due to reduced revenue from customer trading losses in its over-the-counter derivatives business.