EUROZONE DATA: Oct PMIs: Growth Momentum Improving Everywhere Except France
The October PMI round signalled a positive start to Eurozone growth momentum in Q4. With Q3 flash GDP having already printed above the ECB's September projections, the case for unchanged policy rates going forward is growing. However, some ECB officials remain cognisant of downside risks heading into 2026.
Following upward revisions in France and Germany, and stronger-than-expected readings in Italy and Spain, the Eurozone services PMI was revised up to 53.0 (vs 52.6 flash, 51.3 prior). With the manufacturing PMI confirming flash estimates at 50.0 on Monday, this left the composite reading at a 29-month high of 52.5.
At a country level, France's underperformance amid ongoing political uncertainty remains stark.
Summary from the final October composite PMI release:
- "The euro area economy saw its strongest expansion since May 2023 during October, with growth accelerating and tentatively pointing to a breakout from the subdued trend seen in the first nine months of the year. This sharper upturn was supported by improved demand conditions as new business rose at the steepest pace for two-and-a-half years. Employment growth meanwhile quickened to a 16-month high, despite a slight weakening of businesses’ year-ahead activity expectations".
- "As for prices, input cost inflation eased for a second month running, taking it further below its historic average. Euro area companies were more aggressive with their price setting, however, lifting their charges to the greatest extent in seven months"
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GERMAN T-BILL AUCTION RESULTS: 6/11-Month Bubills
| Type | 6-month Bubill | 11-month Bubill |
| Maturity | Apr 15, 2026 | Sep 16, 2026 |
| Allotted | E2.445bln | E1.859bln |
| Previous | E2.463bln | E1.375bln |
| Total sold | E3bln | E1.5bln |
| Target | E3bln | E1.5bln |
| Avg yield | 1.937% | 1.944% |
| Previous | 1.935% | 1.908% |
| Bid-to-cover | 1.45x | 2.91x |
| Previous | 1.66x | 3.81x |
| Bid-to-offer | 1.18x | 3.61x |
| Previous | 1.36x | 3.49x |
| Previous date | Sep 01, 2025 | Sep 08, 2025 |
GILTS: Bear Steepening On Global Cues
Gilts trade lower as steepening impetus from Japan (in the wake of the LDP Party naming a new leader & PM) and heightened political risk in France (as PM Lecornu steps down) weigh.
- Futures break Thursday’s low, basing at 90.48 before a recovery to 90.60.
- Bears remain in technical control at this stage, particularly with UK fiscal risks lingering.
- Initial support and resistance in futures still located at 90.26 & 91.28, respectively.
- Yields 1.5-5.0bp higher, curve steeper.
- 10s still comfortably within their recent 4.60-4.80% range, last 4.73%. Broader benchmark yields fail to test recent highs.
- 2s10s and 5s30s stick within their respective multi-week ranges, trading ~7bp and ~11bp below their cycle closing highs. Steepening trends intact.
- BoE-dated OIS still shows ~5bp of easing through year-end and is not discounting the next 25bp cut until the end of the April MPC.
- We continue to believe that markets underprice the odds of a Q4 rate cut.
- Comments from BoE Governor Bailey are due today.
- They will be closely scrutinised (even though he spoke as recently as Friday), particularly after Deputy Governors Ramsden & Breeden failed to push back against the idea of rate cuts last week.
- We have previously suggested that Bailey and those two Deputies would probably have to join dovish dissenters Dhingra & Taylor if we were to see a cut in Q4.
- Also note that the BoE will sell GBP775mln of short bucket gilts from its APF (3- to 7-Year) this afternoon.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Nov-25 | 3.963 | -0.5 |
Dec-25 | 3.923 | -4.5 |
Feb-26 | 3.818 | -14.9 |
Mar-26 | 3.788 | -17.9 |
Apr-26 | 3.707 | -26.0 |
Jun-26 | 3.683 | -28.4 |
Jul-26 | 3.634 | -33.3 |
Sep-26 | 3.623 | -34.4 |
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Oct07 $1.1650(E1.8bln), $1.1750(E1.2bln), $1.1820(E2.3bln); Oct08 $1.1700(E1.0bln), $1.1770-80(E1.2bln), $1.1800(E1.2bln)
- USD/JPY: Oct08 Y146.50($1.2bln), Y147.00($1.5bln)
