The European Central Bank left interest rates unchanged at its October 2026 meeting, as expected, keeping the main refinancing rate at 2.65% and the deposit facility rate at 2.50%. The central bank warned that elevated energy prices could fuel inflation while weighing on economic activity, particularly if indirect and second-round effects intensify. However, underlying inflation remains broadly stable, with no significant wage response so far. While policymakers offered no clear guidance on the future rate path, the ECB noted that higher borrowing costs across Europe could further dampen growth and inflation. The announcement came hours after ECB President Christine Lagarde reportedly announced plans to step down early, potentially triggering a major leadership transition amid heightened volatility in French bond markets and persistently high energy prices. At the post-meeting press conference, Lagarde confirmed the ECB discussed a rate hike but unanimously agreed to hold rates steady.

US stock indices fell on Thursday, with the S&P 500 down 0.3%, the Nasdaq sliding 1.4%, and the Dow losing 135 points, amid renewed concerns over the sustainability of the AI trade following disappointing results from some hyperscalers. Alphabet plunged 12.6% after missing earnings and revenue expectations, dragging the communication services sector sharply lower, while technology stocks also underperformed. Amazon and Intel, both due to report results after the closing bell, fell 4.2% and 3.6%, respectively. Microsoft lost 0.2% despite reporting solid cloud sales. Elsewhere, Caterpillar tumbled 9.4% after forecasting “moderate” sales growth in the fourth quarter. Eli Lilly jumped 6.5% after raising its revenue outlook on strong demand for its weight-loss drugs, while Merck advanced 3.7% after lifting its guidance. On the data front, the US economy grew at a faster-than-expected 3.4% in the third quarter, while PCE inflation accelerated in September.

The US PCE price index rose 0.5% month-over-month in September 2026, the most in six months, following a 0.3% increase in August and in line with market expectations. Goods prices rose 0.8%, up from 0.3% in August, led by a 1.1% rise in nondurable goods, mainly due to a 9.2% jump in gasoline and other energy goods prices. Durable goods inflation, meanwhile, picked up to 0.2% from 0.1%. Services inflation was unchanged at 0.3%, driven mainly by higher transportation services (2.1%). The core PCE price index, excluding food and energy, increased 0.3%, the most in four months and also in line with forecasts. Year-on-year, headline PCE inflation accelerated to 3.6% from 3.4% in the previous month, while core inflation picked up to 3.1% from 3%. The personal consumption expenditures price index is the primary inflation gauge for the Fed and has been above the 2% target since 2021.

Crude oil fell towards $101 a barrel on Thursday as markets weighed renewed diplomatic efforts to prevent further US military action against Iran. US Vice President JD Vance reportedly contacted Iranian officials, while Foreign Minister Abbas Araghchi said Tehran remained open to diplomacy. President Donald Trump confirmed communication with Iranian authorities, although he described the outreach as focused on medical supplies and acknowledged uncertainty over whether negotiations would succeed. Earlier, reports indicated that US officials advised regional allies to prepare for possible military operations after the November midterm elections. Meanwhile, Europe plans to release 42 million barrels of oil reserves over the next three months, including a substantial volume of diesel, as part of efforts to increase available supply and moderate energy costs.

Italy’s consumer confidence index fell to 90.3 in October 2026, down from 91.2 in September, marking its lowest level since November 2022. The reading was broadly in line with market expectations of 90.9. According to the data agency, the overall decline primarily reflected worsening assessments of the country's economic outlook, which fell to 82.9 from 88.0, rising unemployment expectations, and reduced willingness to purchase durable goods under current conditions. Current sentiment eased to 88.7 from 90.4. In contrast, personal sentiment improved to 93.0 from 92.4, while future sentiment remained stable at 92.3.

The Eurozone Economic Sentiment Indicator fell for a second consecutive month to 96.9 in October 2026, missing market expectations of 97.5. Consumer confidence deteriorated to -17.9, its lowest level since May, as households became more pessimistic about their past and future financial situations. Meanwhile, inflation expectations remained elevated at 33.9, easing slightly from 34.7 in September. Sentiment also weakened among retailers (-8.0 vs. -6.5), construction firms (-5.9 vs. -5.3), and service providers (5.3 vs. 5.9). In contrast, confidence among manufacturers improved to -3.4 from -3.9. Among major economies, sentiment declined sharply in the Netherlands (-3.4 points), while Germany (-0.7) and Spain (-0.5) recorded more moderate decreases. Italy saw a modest improvement (+0.8), while France remained broadly stable (+0.1).