EMEA Morning Briefing: France Budget Battle in Focus

MARKET WRAPS

Watch For:

Germany industrial production; no major trading updates expected.

Opening Call:

European stock futures were lower after Asia stocks traded mixed. U.S. Treasurys were higher, the dollar strengthened. Gold fell and oil rose.

Equities:

European equity futures were lower as investors closely monitored the developments of negotiations of France's budget for next year.

France's finance minister said the government is prepared to exercise special constitutional powers and circumvent Parliament to pass billions in spending cuts if talks stall.

In an interview, French Finance Minister Roland Lescure said he was willing to negotiate on all aspects of the budget, but he has two red lines-sticking to a maximum budget deficit of 5% of gross domestic product and avoiding any changes that hurt growth.

U.S. stocks rallied overnight, powered by technology stocks. The AI powerhouses have grown so vast, and the momentum behind AI's build-out so relentless, that many investors now see these stocks as immune to the effects of higher interest rates, analysts said.

"People look around and say 'Which areas of the market can weather this? '" said Keith Lerner, chief investment adviser for Truist Advisory Services. "Tech is almost seen as defensive in some ways."

Forex:

The U.S. dollar strengthened, as major currencies consolidated against the greenback, but may be aided by appetite for risk assets.

"The S&P 500 rose to a fresh record high, supported by optimism around AI-related spending," said CBA's Samara Hammoud.

The overnight rise in equities has boosted risk sentiment, the international economics and currency strategist said.

Bonds:

The yield on U.S. Treasurys were higher ahead of Fed minutes. The central bank is expected to hold rates this month, after raising them in September for the first time in three years.

Inflation data coming next week could still change the outlook. An auction of three-year notes clears at the highest yield since 2006, as investors demand loftier returns to finance the government.

Long Treasuries could also be a good bet if stocks tanks and the economy weakens, which usually lowers yields as Barron's highlighted last week, according to Founder of Bianco Research, Jim Bianco.

"You get squeamish that something bigger is going on because there's always that fear in the bond market that yields rise till something breaks," Bianco said. But "I don't think that that is a concern right now. I hope I'm not proven wrong on that."

Energy:

Oil prices rose amid ongoing tensions in the Middle East that could sustain concerns over supply disruptions in the region.

Attacks by Yemen's Houthi rebels damaged two airports in southern Saudi Arabia near the border with the war-torn nation, the kingdom said Tuesday.

Also, "Iran's state news agency reported a blast heard from the sea at Qeshm Island, raising concerns of another flare up in the conflict with the U.S.," ANZ Research analysts said.

Metals:

Gold futures fell, with the outlook remaining fragile despite the recovery, said Fawad Razaqzada of Forex.com.

"While dovish Federal Reserve repricing and lower oil prices in the last couple of days has provided some support, the metal is still undermined by the elevated yields and the risk that oil prices may rebound and create fresh volatility for financial markets," he said.

Uncertainty over the U.S.-Iran situation is a source of pressure, while central bank buying means downside is also limited, he added.

TODAY'S TOP HEADLINES

Inside Bessent's Treasury: Tension, Turnover and Unmet Economic Goals

WASHINGTON-Scott Bessent was fuming.

President Trump had just asked his Treasury secretary to investigate allegations of fraud in Minnesota's Somali community-and Bessent thought one of his top deputies was dragging his feet.

The Case for Buying the Long Bond-and What to Know Before You Do

Two strategists who have long shunned government bonds are making the case to buy long bonds.

Since 2022, Gavekal Research co-founder Anatole Kaletsky has recommended investors avoid sovereign debt from the seven major advanced economies. In a note on Tuesday, he was championing 10- and 30-year U.S. government bonds. Founder of Bianco Research, Jim Bianco, also turned around on long-duration U.S. government debt for the first time in six years last week.

French Government Is Willing to Bypass Parliament to Pass Billions in Cuts

PARIS-France's finance minister said the government is prepared to exercise special constitutional powers and circumvent Parliament to pass billions in spending cuts if negotiations stall over next year's budget.

In an interview, French Finance Minister Roland Lescure said he was willing to negotiate on all aspects of the budget, but he has two red lines-sticking to a maximum budget deficit of 5% of gross domestic product and avoiding any changes that hurt growth.

Jaguar Ditches the Pink Branding in Unveil of Its Big, Sleek Type 01 EV

Jaguar has introduced the showroom-ready version of the electric vehicle it hopes will usher in a new, ultraluxury era for the British carmaker, leaving aside some of the provocative notes it sounded nearly two years ago when it announced its new strategy.

In contrast with the two-door concept car Jaguar debuted in pink and bright blue at Miami Art Week in 2024, the four-door Type 01 model arrived on Tuesday in silver, with an "orchid white" interior. And where the original avant-garde teaser video depicted expressionless models striding around a fuchsia landscape, the EV's first ad features a handsome driver, atmospheric smoke, cars traveling at high speeds and a color scheme heavy on red and black.

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Expected Major Events for Wednesday 06:00/NOR: Aug Industrial Production Index

06:00/UK: Sep Lloyds House Price Index

06:00/GER: Aug Industrial Production Index

06:30/HUN: Sep CPI

06:45/FRA: Aug Foreign trade

06:45/FRA: Aug Balance of payments

07:00/SWI: Sep SNB foreign currency reserves

07:00/CZE: Aug Industry, Construction

07:00/CZE: Aug External trade

08:00/ICE: Sep External trade, preliminary figures

08:30/UK: Sep Narrow money (Notes & Coin) and reserve balances

09:00/LUX: 2Q GDP

09:00/LUX: Sep CPI

16:59/POL: Polish interest rate decision

23:01/UK: Sep RICS Residential Market Survey

23:01/UK: Sep KPMG and REC UK Report on Jobs

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(END) Dow Jones Newswires

October 07, 2026 00:17 ET (04:17 GMT)