Financial Markets Daily Report20 October 2026
Risk sentiment weakened in Europe as persistent investor concerns over France’s fiscal outlook continued to weigh on equities, the euro and sovereign bonds. In contrast, U.S. equities advanced, led by gains in AI-related and semiconductor stocks.
European sovereign yields moved higher, with France underperforming as its 10Y yield rose to 4.94% and the OAT-Bund spread widened to 148bp. Meanwhile, the euro depreciated against both the dollar and sterling. Markets expect the ECB to keep rates on hold at its October meeting, while assigning an 84% probability to a rate hike in December.
In the U.S., Treasury yields rose, while markets continue to price in the Fed to keep rates on hold at its October meeting. Oil prices slipped marginally after Trump signed an executive order waiving some sanctions and tariffs related to Russian exports and following renewed attacks by an Iran-backed group on Saudi energy infrastructure.