Markets
France avoided a Moody’s rating downgrade last Friday, while weekend protests were considered to have shifted into lower/less aggressive gear. Today, this proved to be sufficient to halt last week’s violent EMU credit spread widening. The 10-yr OAT swapspread cedes 8 bps from Friday’s close (currently 147 bps) with the 10-yr OLO swapspread dropping 4 bps (to 93 bps). Belgian budget talks remain deadlocked with most governing parties blaming Flemish Socialists (Vooruit) for taking them hostage despite fierce market pressure. Belgian PM De Wever wanted a deal by Halloween, but is rumoured to be willing to push his self-imposed deadline to November 3rd. The euro failed to profit from the temporary relief, just the way it didn’t suffer during last week’s widening. EUR/USD opened back above 1.12, but lost that handle again to change hands around 1.1180 currently. Higher gas prices remain an issue for the single currency with the Dutch TTF reference contract today approaching €100/MWh for the first time since end of 2022. General risk sentiment takes a turn for the better with main European and US indices currently up to 1% higher. Today’s eco calendar failed to inspire with German Ifo business sentiment closely mirroring last week’s PMIs. Things get more spicy later this week with the Fed and the ECB probably defending a status quo while strong price pressures maybe call for leaving the gradual approach. They’ll in any case have to install a hawkish message to avoid inflation expectations from drifting away. This week’s eco numbers will point in the same direction with upside risks for both September US PCE deflators and national EMU October CPI numbers. First Q3 GDP estimates are expected to show resilience in the EMU and outperformance in the US.
The Belgian debt agency today raised the maximum of the targeted €2-2.8bn in its regular monthly OLO auction. OLO 97 (€0.9bn 3% Jun2033), OLO 106 (€1.3bn 3.4% Jun2036) and OLO 90 (€0.6bn 0.4% Jun2040) were on tap. The auction bid cover was slightly over 1.6. After today’s sale, the Belgian debt agency nearly fully reached its 2026 OLO funding need (€51.6bn vs 50.45bn).
News & Views
The Czech composite confidence indicator retreated more than expected in October. The index slipped from 99.5 to 97.9, the lowest since April 2025. Both of its components decreased. The business confidence indicator fell by 1.8 points to 96.6, virtually the joint-lowest in two years. The industrial sector printed the largest monthly drop (-5.6), followed by 1.7 points in trade and 0.6 points in construction. Selected services still eked out a 2 point gain. Consumer confidence meanwhile decreased slightly by 0.8 points to 104.3. The share of consumers expecting the economic situation to deteriorate over the next twelve months increased. The share of respondents who consider their current financial situation as worse than it was in the previous twelve months decreased slightly. That said, the share of households expecting an improvement to their financial situation over the next twelve months has decreased. Similarly, there’s less appetite for making major purchases over the next twelve months. The Czech crown was little changed around the publication window but does lose ground in a daily perspective. EUR/CZK currently trades around 24.37.
The EU plans to use safeguard measures to reduce imports of products in sectors including chemicals, furniture and machinery from China, according to people familiar with the matter. Such measures can take the form of import quotas – with the recently introduced 350k annual cap on Chinese hybrid vehicles serving as case in point – or import tariffs. Bloomberg reported earlier that the Commission already started analyzing trade data to check whether there’s evidence of an import surge in specific sectors. That is the necessary condition for such measures to be allowed. More broadly, the Commission also wants to establish new powers that can help cut ballooning trade deficits as well as act as a deterrent. Concrete proposals are expected before mid-December.
 with the 10-yr OLO swapspread dropping 4 bps (to 93 bps).){kind=link}