The German 10-year Bund yield tumbled 8 basis points to 3.38%, its lowest level in five weeks, tracking its US counterparts lower. The decline came amid a global flight to safety following an equity sell-off driven by AI-related concerns and fears over elevated borrowing costs, persistent inflationary pressures, high interest rates, and elevated oil prices. Meanwhile, ECB President Lagarde said energy-driven inflation had yet to spread across the broader euro-area economy, reinforcing the case for a cautious, wait-and-see approach. However, ECB policymaker Gediminas Šimkus warned that further rate hikes could be necessary as price pressures continue to build, adding that an increase as early as this month remained possible. Persistent upside inflation surprises and the ongoing US-Iran conflict have also strengthened market expectations of another ECB rate hike in December.

US producer prices are expected to rise 0.5% month-over-month in September 2026, marking the strongest increase in four months following a 0.4% gain in August. The reading would signal a further acceleration in producer-level inflation for a third consecutive month, amid elevated energy costs. Core PPI, which excludes food and energy, is forecast to increase 0.3% month-over-month, up from 0.2% in August. On an annual basis, however, headline producer inflation is expected to ease to 5.3% from 5.4%, while core PPI inflation is projected to slow to 4.4% from 4.6%.

European stocks fell on Thursday, with the STOXX 50 down 0.7% and the STOXX 600 slipping 0.3%, tracking losses across US and Asian markets amid a global tech sell-off. Chip stocks tumbled on concerns over AI-related valuations, while high US inflation, prospects of high interest rates and elevated oil prices added to investor caution. Markets also kept a close eye on fresh corporate earnings. ASML Holding plunged 6.6%, while Infineon and STMicroelectronics dropped 9.2% and 7.3%, respectively, among the STOXX 600’s worst performers. Basic resources and industrial goods stocks also came under pressure, with Siemens falling 2.7%, Schneider Electric losing 5.1%, ABB declining 4.6%, and Siemens Energy dropping 7.7%. In contrast, telecoms and household goods stocks advanced. Ericsson led the STOXX 600, surging nearly 10% after returning to sales growth in Q3 and reporting better-than-expected earnings. Pernod Ricard added 3.4% after a smaller-than-expected sales decline last quarter.

The annual inflation rate in France came in at 3.1% in September 2026, revised up from the preliminary estimate of 3.0% and picking up from 2.4% in August. This marked the highest reading since January 2024, driven mainly by a sharp acceleration in energy inflation to 21.3% from 16.7%, particularly as petroleum product prices rose 36.2%. Meanwhile, services inflation accelerated to 2.4% from 1.9%, while food inflation increased to 1.4% from 1.1%. The decline in manufactured product prices also eased to 0.3% from 0.4%, while tobacco inflation remained unchanged at 3.3%. On a monthly basis, consumer prices fell 0.3%, following a 0.7% increase in August, as seasonal declines in services prices, particularly for accommodation and transport, outweighed further increases in energy prices. Meanwhile, the EU-harmonised annual inflation rate rose to 3.4% from 2.6%, while monthly HICP fell 0.3% after increasing 0.7% in August.

The Nikkei 225 Index plunged 4.9% to close at 64,426 on Thursday, marking its biggest one-day drop since March as the selloff in technology stocks intensified on mounting concerns over the sustainability of massive artificial intelligence investments. The sector’s credit outlook deteriorated on expectations that policymakers will have to raise borrowing costs to contain persistent energy-driven inflation. Japanese companies have significant exposure to the global AI infrastructure buildout, leaving them vulnerable to sharp market repricing amid AI elevated valuations. Tech and AI-linked stocks led the declines in Japan, with sharp losses from Kioxia (-12.5%), Advantest 9-14.2%), SoftBank Group (-8.9%), Taiyo Yuden (-10%) and Lasertec (-13.3%). Banking stocks also weakened, including Mitsubishi UFJ (-1.6%), Sumitomo Mitsui (-1.7%) and Mizuho Financial (-2.7%).

The US dollar index slipped to around 102 on Thursday, retreating from 18-month highs as investors continued to evaluate the Federal Reserve’s monetary policy outlook following stronger-than-expected inflation data. Figures released Wednesday showed that annual headline inflation accelerated to 3.7% in September, surpassing forecasts of 3.6%, while core inflation edged up to 2.6%, above expectations of 2.5%. Chicago Fed's Austan Goolsbee described the figures as “discouraging” and cautioned that the rapid expansion of AI infrastructure could also be overheating the economy. However, some policymakers continued to favor a cautious approach to further rate increases, with markets pricing in roughly a 73% probability that the Fed will keep interest rates unchanged this month. Investors are now awaiting further remarks from Fed Chair Kevin Warsh ahead of the central bank’s media blackout, which begins on Saturday. The dollar weakened the most against the euro, sterling and kiwi.