Symbolic imageFrench bond stress and contraction deepen as unrest hits economy
French borrowing costs stay above 5% while a business survey shows the economy shrinking amid unrest. Attention turns to the ECB as a possible backstop.
French 10-year yields passed 5% on Wednesday, 21 October, for the first time since 2002 and reached 5.1% on Thursday, Le Monde reports. On Friday investors demanded over 1.7 percentage points more than for German bonds, the widest gap since the 2012 euro crisis, Handelsblatt writes; Reuters puts Thursday's spread at 177.7 basis points, the widest since 2011. Bloomberg says French bond risk neared its biggest weekly rise, and the WSJ reports the yen hit a one-year high against the euro on French debt worries.
Activity shrinks
S&P Global's composite PMI fell to 48.4 from 51.1 in September, signalling contraction; economists had expected modest growth. Handelsblatt ties the slump to violence in Paris and other cities, citing first chamber of commerce estimates of more than 2,000 damaged businesses. Reuters says euro zone growth slowed to a four-month low.
ECB in focus
Le Monde calls an IMF intervention highly improbable and says all eyes are on the ECB, whose tools range from statements to direct market intervention. France still funds itself smoothly, it notes, and a Goldman Sachs economist argues the fix is a smaller deficit rather than the ECB.