Fra Danske Bank:
Sofie Liv Petry, [email protected] , Assistant Analyst
For mobile users we recommend the web-version * including the FI and FX morning comment
*Restricted access – only for professional investors and investors domiciled in and a resident of an EEA member state.
There are no tier-1 releases today. Focus will remain on developments in the European markets and geopolitical developments in the Middle East.
In France, the key issue in the coming days will be whether the Socialists and Marine Le Pen’s National Rally (NR) signal they are willing to topple the government over the budget. Le Pen will present a five-year EUR 125bn savings plan today and Jordan Bardella will present the party’s counter-budget for 2027. The government is likely to use Article 49.3 to pass the budget without a majority, which would expose it to a no-confidence vote. If either the Socialists or NR abstains, the government and budget are likely to survive, as we also expect the centre-right Republicans (LR) not to back a no-confidence motion.
In the euro area, the august retail sales data for the euro area is expected to show a slight increase of 0.3% m/m.
Economic calendar
In the US, President Trump has signed an executive order to temporarily ease restrictions on the use of tax-exempt red diesel on public roads in an effort to contain high fuel prices. The measure defers federal excise taxes on dyed diesel for the rest of the year and is aimed at lowering costs for farmers and truckers. The move comes ahead of the mid-term elections in November and follows pressure on the administration to address the fuel price surge.
In the US, the ISM services PMI for September came in slightly below expectations at 54.9 (cons: 55.0, prior: 55.4), but still pointing to solid activity in the service sector. Input prices increased further marking the highest level since 2022. New orders and business activity both declined, but remained at strong levels, while the employment index improved to 50.1 from 47.9, moving back into slightly positive territory. The S&P Global services flash PMI released earlier was confirmed at 58.4, suggesting stronger service-sector activity than indicated by the ISM survey.
In France, central bank governor Emmanuel Moulin warned that the country risks being “strangled by interest rates” if it does not act to repair public finances. He said markets could be reassured if the government passes its proposed budget, including EUR 43bn in spending cuts and tax increases, to narrow the deficit. French 10-year yield spread to Germany increased to its highest level since 2011 last week amid fiscal and political concerns, while Moulin stressed that the solution lies with France rather than relying on potential ECB intervention. The 10-year yield spread to Germany tightened slightly yesterday but remains elevated, with uncertainty still high.
In the euro area, the Sentix investor confidence indicator declined to 2.7 in October from a four-year high of 5.1 in September, below market expectations of 4.3. While investors’ assessment of current conditions was unchanged, the decline reflected a noticeable setback in expectations. The final services and composite PMIs were also released and confirmed flash estimates.
Additionally, the EUR came under pressure as widening concerns over French fiscal policy and the sell-off in French government bonds weighed. EUR/USD briefly fell to a 17-month low around 1.116, while markets have also scaled back expectations for further ECB rate hikes.
Also in the euro area, Germany and France are urging the EU to adopt tougher trade powers that could cut off China or other countries from the single market if they destabilise trade relations. In a letter to European Commission President Ursula von der Leyen, the two governments called for “powerful measures”, while also pushing for more aggressive investigations into sectors facing unfair competition from heavily subsidised imports. China has vowed to retaliate if EU adopts broad tariffs on Chinese goods.
In Spain, Prime Minister Pedro Sánchez has called a snap election for 29 November, with polls suggesting the centre-right People’s Party could win and potentially govern with the far-right Vox party. A new 2027 budget now looks unlikely, meaning Spain may again roll over its previous budget, keeping fiscal policy broadly steady and debt-to-GDP on a declining path. We do not expect a near-term impact on growth or public finances, supported by strong employment and consumption, though tighter immigration policy could weigh on medium-term potential growth.
In Sweden, the services PMI increased to 57.4 in September (prior: 56.0), the highest level since November 2025. The rise was driven mainly by stronger new orders and improved employment. The price component ticked up again after declining since May, while delivery times also increased, continuing their upward trend.
Equities: Equities moved higher on Monday and finished not far from session highs. The Nasdaq even reached a fresh record, while the S&P 500 is just 0.3% below its own.
The main takeaway from yesterday’s market action was that equities rose despite another backup in long-term yields. Unlike last week, gains were not driven solely by technology stocks, as market breadth was positive as well. However, the sector mix was unusual, with materials, communication services, energy, and banks among the outperformers. Defensives such as healthcare and consumer staples were also strong, while industrials and real estate lagged. Hence, this was neither a classic risk-on move nor inflation-relief. Rather, it appeared to be a broader catch-up session without clear directional drivers, other than the fact that parts of the market have remained sidelined for too long.
FI and FX: The spread between France and peers tightened yesterday and the French curve steepened from the front end although the 10Y spread to Germany is still at a very elevated level. Focus is likely to move to the 3Y auction tonight from the US Treasury. The outright level of close to 5% is looking attractive despite higher-than-expected ISM service prices released yesterday. Hence, the long end of the Treasury curve remains under pressure and there will be focus on both 10Y and 30Y Treasury auctions tomorrow and Thursday.
The easing pressure on France was also supportive for the EUR versus the dollar, where EURUSD stabilised above the 1.12-level. The JPY was also stable against the dollar. Brent declined and is testing the USD 100-level.
See also our in-depth FI and FX morning comment *
Reading the Markets USD – French debt concerns keep EUR/USD under pressure , 6 October
Executive Briefing – Global growth rising amid new European debt stress , 5 October
France: From Aaa to A+, but not another Euro debt crisis , 5 October
Weekly focus – French budget sets off turmoil in European bonds , 2 October
Reading the Markets Sweden , 2 October
Report completed: 6 October 2026, 07:00 CEST
Report first disseminated: 6 October 2026, 07:30 CEST
Disclosures/disclaimer
*For a definition of ‘Professional Investors’ under MiFID II (Market in Financial Instruments Directive 2014/65), go to the FAQ. To change your disclaimer settings, go to ‘Research Disclaimer’ at the footer of research.danskebank.com.
Hurtige nyheder er stadig i beta-fasen, og fejl kan derfor forekomme.
