European Midday Briefing: Stocks Rise While Talks on French Impasse Continue

MARKET WRAPS

European shares rose Wednesday, rebounding from Tuesday's lower close, while focus remained on France's fiscal and political impasse.

The resignation of Prime Minister Sebastien Lecornu still weighed on Europe, putting the euro and bonds under pressure , and talks aiming for a solution to the stalemate continue.

"As it is not entirely clear what Lecornu should achieve in these talks, it seems that Macron is only trying to buy time." Commerzbank said.

It comes as German industrial production slipped sharply in August with output in the EU's largest economy down 4.3% on month. The decline is reflective of the uncertainty caused by U.S. tariffs. On Tuesday, German manufacturing orders sank for the fourth straight month in August.

Elsewhere, investors are expected to closely scour the release later today of the Federal Open Market Committee meeting minutes for insight on future Federal Reserve policies.

Meanwhile, gold continued its rally after rising above the historic $4,000 a troy ounce mark.

Shares on the Move

European steel stocks rose as investors welcomed new trade measures unveiled by the European Union.

The European Commission wants to half the volume of tariff-free steel imports and place a tariff on imports above that level. ArcelorMittal, Thyssenkrupp Voestalpine and Salzgitter were among the companies gaining.

Stocks to Watch

Jaguar Land Rover's free cash flow was estimated to have dropped 750 million pounds in fiscal 2Q after a cyberattack affected sales, Nomura said.

Cash flow should recover as production normalizes, with operations resuming from Oct. 8 and average selling prices were seen to rise 3% on quarter.

Market Insight

The European Steel Association said it welcomed new trade measures proposed by the European Commission to protect the EU steel industry from imports. It called the measures a lifeline for steelmakers and workers.

"We are hopeful that these new provisions will lay the ground for a renewed dialogue with the Trump administration to lift the current 50% tariffs on EU steel imports and relaunch work on an alliance to ringfence against global overcapacity," it said.

Aperam said the move to set steel import quotas would make the EU's steel industry more competitive, adding that the 50% levy that imports above the quota would face would protect the market from trade deflection.

The trade measures, however, could have an inflationary impact and disrupt supply for Europe's automakers, the European Automobile Manufacturers' Association said, adding that automakers need to import certain types of steel not available domestically.

"The parameters ... go too far in ring-fencing the European market. We need to find a better balance between the needs of European producers and users of steel."

U.S. Markets:

Stock futures pointed to a higher open Wednesday, appearing to rebound from Tuesday's lower close.

Forex:

The dollar rose to an almost two-month high against a basket of currencies as political developments in Japan and France put the Japanese yen and euro under pressure.

Bonds:

Eurozone government bond yields edged lower, tracking Treasury yields, while focus remained on French bonds and the result of last-ditch talks between lawmakers and out-going Prime Minister Lecornu.

French government bonds were expected to continue underperforming their peers, Capital Economics said, which added that the fiscal backdrop looked worrisome.

"France looks particularly worrying, given the ongoing parliamentary deadlock and the growing chance of another early election."

Long-term government bond yields stabilized Tuesday but political developments in France and Japan over recent days highlight how uncertainty affects long-term bond yields, Capital Economics said separately.

"We think steeper yield curves are here to stay--and most will steepen a bit further over coming months."

Treasury yields edged lower, extending the previous day's declining trend. The move comes as the minutes of the September FOMC meeting and a $39 billion auction of 10-year Treasury notes were due.

The share of foreign holders of French government debt could lead to higher volatility and rating downgrades could also weigh negatively on demand, UniCredit's Investment Institute said.

When French government OATs come under pressure Bunds tend to benefit, while evidence that Italian government bonds benefit is mixed.

Yields on U.K. government bonds fell as investors sought safe-haven assets.

AI-related concerns also contribute to risk-off sentiment after reports indicated that profit margins on tech company Oracle could be lower than forecasts.

Energy:

Oil prices rose, but remained in a narrow range, as investors weighed concerns about a surplus of supply.

"Until the physical market shows signs of softening via rising inventories, investors are likely to discount the impact of the production increases," ANZ Research said.

Metals:

Gold futures rose and prices reached record highs, rising above the historic $4,000 mark, as investors sought safe havens against economic and political uncertainty.

Bullion is also boosted by expectations for further U.S. interest-rate cuts, strong ETF inflows and sustained central-bank buying.

Spot gold prices rose and prices have the potential to rise further, according to ING, amidst Trump's continuing trade war and elevated geopolitical risks.

ING said the fact that central banks are still buying suggests gold still has further room to run.

Now that gold has reached the $4,000/ounce mark, some profit-taking and tactical positioning could lay ahead as traders assess the sustainability of the rally, but it is possible the market will refuse to cool , Pepperstone said.

"Selling gold at this stage has become a high-risk endeavor for one simple reason: conviction."

It said that gold has evolved from a being a hedge during uncertainty into a "conviction trade," reflecting doubts about policy credibility and erratic fiscal decision-making.

Gold buying by central banks was likely to continue for another three to five years, Julius Baer said, adding that this was expected to remain a structural driver of gold prices. Julius Baer raised its three-month and 12-month gold price target.

Base metals rose in early trading, with copper and aluminum futures on the London Metal Exchange posting gains.

"Base metals have continued to scale new heights, driven by the copper momentum, which has propelled the entire complex higher," Sucden Financial said.

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October 08, 2025 05:14 ET (09:14 GMT)