Europe Markets Weekly — 2026-10-29

Market Snapshot

• STOXX 600: Traded in narrow ranges on Thursday ahead of the ECB decision; earlier in the week (Tuesday) it added 0.5%.
• DAX: Up 0.8% on Tuesday; traded flat to slightly higher on Thursday ahead of key data.
• FTSE 100: Fell 0.7% on Tuesday; remained subdued on Thursday as investors awaited US inflation data.
• CAC 40: Increased 0.7% on Tuesday; traded narrowly on Thursday.

Key Drivers

• ECB Policy Decision: The European Central Bank unanimously left its three key interest rates unchanged, keeping the deposit rate at 2.50%. Policymakers cited the need to assess the impact of renewed energy-price increases and tighter financial conditions.
• Lagarde’s Early Exit: ECB President Christine Lagarde announced she will leave her post in February 2027, months before her term ends. She stated she wanted "freedom of speech" and noted that inflation remains near double the ECB's target (3.8%).
• Currency Volatility: Following the ECB's hold and strong US PCE inflation data, the euro fell to a 17-month low of 1.1104 against the US dollar, its weakest level since May 2025.
• US Fed Impact: Markets reacted to the Federal Reserve's decision to leave interest rates unchanged, which contributed to a mixed global sentiment, with European stocks missing out on the global tech rally.

Earnings & Corporate

• Strong Aggregate Earnings: European blue-chips are on track to deliver their second-best quarterly earnings in four years. The LSEG I/B/E/S report indicated that aggregate earnings for the STOXX 600 are tracking growth of nearly 21% year-over-year, driven largely by energy companies.
• HSBC Results: HSBC shares fell on Tuesday after its third-quarter results came in below expectations, dragging down the FTSE 100 despite gains in other European indices.

Geopolitics & Energy

• Gas Price Surge: European natural gas prices hit a four-year high as the conflict in Iran choked off liquefied natural gas shipments through the Strait of Hormuz. EU gas storage stood at just 74.62% full on October 25, the lowest seasonal level since records began in 2011.
• Winter Energy Crisis: EU energy ministers are meeting to address soaring gas and diesel prices. The International Energy Agency (IEA) warned that Europe is entering winter with the lowest gas reserves on record, raising concerns for households and industry.

• Oil Prices: Despite diplomatic efforts to ease tensions with Iran, Standard Chartered expects oil prices to remain elevated, potentially exceeding $100 per barrel, until Gulf shipping and production fully recover.
• Russian LNG Phase-Out: The EU pledged to phase out Russian liquefied natural gas by the end of 2026, but rising imports and regional conflicts suggest Europe may miss this target.

What to Watch Next Week

• US Inflation Data: Investors are closely monitoring US inflation figures, which have shown acceleration and are impacting the Euro/Dollar exchange rate.
• Corporate Earnings: Further Q3 earnings announcements from major European companies are expected to continue influencing sector performance, particularly in energy and banking.
• Energy Policy Decisions: Outcomes from EU energy ministerial meetings regarding gas storage and winter preparedness will be critical for market sentiment.