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Markets Snap Back After Early Losses

The pan-European Stoxx 600 closed 0.2% higher, reversing earlier declines as most sectors turned green. London’s FTSE 100 continued its record-breaking rally, finishing the day 0.7% higher after hitting an all-time high on Thursday. Germany’s DAX added 0.3%, while France’s CAC 40 climbed 0.4%, supported by gains in banking and industrial shares.

Investor sentiment improved sharply after the U.S. Bureau of Labor Statistics reported that September’s annual inflation rate came in at 3%, slightly below market expectations of 3.2%. The softer data bolstered hopes that the Federal Reserve could adopt a more dovish stance in upcoming meetings, potentially paving the way for rate cuts in early 2026.

Wall Street and Global Ripple Effects

Following the inflation release — the only major federal report permitted during the ongoing U.S. government shutdown — Wall Street surged, with the S&P 500 up 0.9% and the Nasdaq Composite rising 1.2%. The data was seen as a sign that price pressures are easing despite resilient economic growth, reinforcing confidence across global markets.

Asian markets followed suit, with South Korea’s Kospi touching a new record high, driven by optimism over upcoming U.S.-China diplomatic talks. Meanwhile, Japan’s Nikkei 225 edged up 0.6% and Hong Kong’s Hang Seng Index gained 0.8%, signaling broad regional strength.

Corporate Earnings Drive European Optimism

Earnings season remained in full swing across Europe, with several heavyweight companies posting stronger-than-expected results.

• Saab AB, the Swedish defense giant, jumped 6.1% after raising its 2025 sales guidance, buoyed by rising defense spending across Europe amid continued geopolitical uncertainty.
• NatWest Group reported £2.18 billion ($2.9 billion) in pre-tax profits for the third quarter, comfortably surpassing expectations of £1.84 billion. The bank also lifted its 2025 income guidance to £16.3 billion, reflecting stronger lending margins and cost controls.
• Energy major ENI, pharmaceutical firm Sanofi, Volvo Group, and Porsche AG also delivered updates that reassured investors about corporate resilience in a mixed macroeconomic environment.

The financials and industrials sectors were among the day’s top performers, while energy stocks saw mild gains following modest upticks in Brent crude, which traded near $86 per barrel.

Political Tensions and Trade Concerns

While markets celebrated the inflation relief, geopolitical headlines still weighed on sentiment. The European Union and the United States announced synchronized sanctions packages targeting Russia, signaling renewed cooperation after months of diplomatic friction.

Meanwhile, trade tensions re-emerged in North America after an Ontario government advertisement featuring former U.S. President Ronald Reagan criticizing tariffs drew a harsh response from Donald Trump, who announced he was terminating all trade negotiations with Canada. The development added fresh uncertainty to cross-border trade prospects.

Outlook: Investors Eye Rate Cuts and Global Growth

With inflation cooling and corporate profits holding steady, European investors are entering the final months of the year with cautious optimism. Analysts believe that if upcoming U.S. and eurozone inflation data confirm a downward trend, central banks may begin signaling rate cuts by the first quarter of 2026.

Market participants are also watching the upcoming U.S.-China talks, expected to influence risk sentiment across global equities. For now, the easing inflation figures and strong earnings reports have given markets the boost they needed after weeks of uncertainty.