Financial Markets Daily Report
26 October 2026
Investors ended the week shaking off some of the previous risk-off mood. In the eurozone, German yields rose and peripheral spreads narrowed (particularly in France) as flight-to-quality demand faded, while weaker-than-expected October PMIs (French Composite: 48.7) reinforced expectations of an ECB pause on Thursday.
This happened despite a new surge in energy prices, which pushed 1-year inflation swaps higher on both sides of the Atlantic. US Treasury yields rose as the AI trade bounced back slightly and safe-haven flows receded. Fed rate expectations edged higher, although markets still price in a pause at this week's meeting.
The dollar firmed in this context, while the euro was broadly stable, remaining at $1.12. Equity indices were mixed: in Europe, the IBEX and FTSE MIB rose while the DAX and the CAC40 fell, as Spanish and Italian banks advanced amid reduced concerns about contagion from French sovereign risk. US indices fell, even though tech companies rebounded slightly.