The yield on France's 10-year government bonds surged past 3.54% following Eurozone data release which confirmed heightened inflationary pressures in September. This development bolsters the anticipation that the European Central Bank is inclined to maintain its current monetary policy stance. Inflation reached 2.2%, aligning with predictions and surpassing the ECB's medium-term target of 2%.
Concurrently, on October 1, the United States federal government experienced its first shutdown in nearly seven years. This situation has resulted in a "data vacuum," restricting the availability of key indicators usually relied upon by investors to assess the US economic climate and predict future actions by the Federal Reserve.
In France, newly appointed Prime Minister Sébastien Lecornu is confronted with a difficult fiscal landscape. He aims to decrease the budget deficit to approximately 4.7% of GDP by 2026, including a proposed €6 billion cut in routine government expenditures. However, his strategy faces political hurdles, notably from the Socialist Party, which has threatened to obstruct critical measures, potentially destabilizing President Emmanuel Macron's administration.
