A week dominated by a global bond selloff, French sovereign stress, a 17-month low in the euro and an oil round trip on Iran — with equity records giving way to AI wobbles.

Bond yields test multi-decade highs before a late reprieve

The week opened with a soft US jobs report — September payrolls of just +29k against +133k expected — that briefly argued for patience, but the bond market quickly moved the other way. ISM services came in at 54.9 against a 55 consensus with prices paid at their highest since June 2022, and Wednesday’s FOMC minutes showed all 19 officials backing September’s hike and most judging another appropriate by year-end. The 10-year reached 5.32%, around levels last seen in 2002, and the 30-year pushed to 5.70% midweek, with the 30-year fixed mortgage rate jumping to 7.49% from 7.30%. Strong auctions and a late pullback in crude then allowed a reversal: by Friday morning 10s sat near 5.23% and 30s at 5.61%.

France at the epicentre of a European sovereign repricing

Europe entered the week absorbing the largest weekly widening in the Franco-German 10-year spread in data back to reunification — 32bp, to 141bp, with an intraweek extreme near 160bp that briefly left France paying more than Italy or Greece. Tuesday and Wednesday delivered a violent snap-back, the biggest two-day narrowing since the March 2020 shock, helped by deficit-reduction pledges from Marine Le Pen; Banque de France’s Emmanuel Moulin countered that the country risks being “strangled by interest rates.” Thursday reversed much of the relief, and the spread finished the week broadly steady around 140bp, with 10-year OATs at 4.89%. UK gilts were collateral damage, the 10-year rising to a post-2007 high of 5.48%. Christine Lagarde closed the week reminding finance ministers the ECB has instruments for disorderly market dynamics.

Euro slides to a 17-month low as fiscal risk, not rate differentials, drives FX

The single currency was the week’s clearest casualty. A break below 1.12 on Monday triggered barrier-related selling, and Thursday brought a low of 1.1197, the weakest since May 2025, before a modest squeeze left EUR/USD just under 1.123 into Friday. Notably, the move was attributed to Europe’s fiscal arithmetic and political calendar — Spain called an early general election, Germany’s coalition quarrelled over tax, French schools emptied amid protests — rather than to the Fed. One survey showed investors cutting euro exposure by the most on record, and euro options flipped bearish against sterling for the first time since 2024. The pound outperformed, with Labour holding Keir Starmer’s former Holborn and St Pancras seat; dollar/yen remained pinned around 158.

Oil’s round trip: from a Saudi price cut to $106 and back

Crude set the risk mood all week. It began soft, with Saudi Aramco’s benchmark Arab Light price to Asia cut to a six-year low and Brent slipping below $100 — a key support for the early bond rally. Iranian attacks on shipping in the Strait of Hormuz, Houthi strikes on Saudi airports that killed three, and reporting that the White House had sought options for strikes on Iran then drove Brent to nearly $106. The premium deflated on Friday after Donald Trump said the US would not attack Iran before November’s midterms. Brent fell back beneath $103, lifting risk assets into the weekend. Supply risk did not disappear: Hurricane Isaias forced shut-ins across the US Gulf.

Equities: fresh records midweek, then cracks in the AI complex

US indices spent the first half of the week ignoring the bond market, with the S&P 500 setting its first record since mid-August on Tuesday and breadth improving after the equal-weight index had posted seven consecutive weekly declines. Momentum faded from Thursday as the oil spike and higher yields bit, and Friday brought a sharper rotation: the Nasdaq fell 1.25% and the S&P 500 0.47%, led lower by semiconductors and memory after press reporting suggested OpenAI’s annualised revenue may be running below prior signals — even as breadth stayed positive, with the equal-weight index beating the headline by over 100bp. Europe fared worse, the CAC 40 hitting a six-month low on French bank weakness and the STOXX 600 closing at its lowest since June.

What to watch this week

• Third-quarter US earnings season, with consensus looking for roughly 25% year-on-year S&P 500 profit growth and fresh scrutiny of AI capex and data-centre borrowing costs.
• Whether the Treasury market stabilises after the week’s reversal, including the upcoming dealer survey and any follow-through from the record non-dealer take-up at the 10-year auction.
• The French political and fiscal calendar — budget passage, the spread’s behaviour around 140bp, and whether the ECB’s stated readiness to address disorderly dynamics is tested.
• The outcome of the IEA Governing Board’s deliberation on an emergency release of up to 100 million barrels, still unresolved as the week closed, alongside Hurricane Isaias disruption in the Gulf of Mexico.
• Remaining geopolitical threads: continued attacks on shipping in the Strait of Hormuz, a Putin–Trump call said to be expected, Brazil’s 25 October presidential runoff and the 3 November US midterms.

This commentary is for information purposes only and does not constitute investment advice or an offer or solicitation to buy or sell any financial instrument. Past performance is not indicative of future results.