European stocks fall towards weekly loss on French debt

European stocks continued their attempt to recover at the start of Friday trading after significant losses during the week. However, they remained on track for a weekly decline due to concerns over French debt, rising borrowing costs, and geopolitical tensions. The STOXX Europe 600 index rose by 0.8%, after hitting its lowest level in about four months. The French CAC 40 and UK FTSE 100 indices each increased by 0.8%, while the Spanish IBEX 35 gained 1%. Despite this, the broader European index still faces a weekly decline of about 1%. France is currently experiencing a debt crisis, with public debt rising to 120% of GDP. The bond market is under significant pressure as yields on 10-year French bonds approach their highest levels in 25 years, with the yield spread over German bonds surpassing 140 basis points. This has led to a decline in French bank shares and increased strain on Italian and Greek bond markets. Additionally, geopolitical tensions in the Gulf region and rising energy prices—exceeding $100 per barrel for oil and €80 per megawatt-hour for gas—have deepened fears of inflation and economic slowdown. This apprehension is compounded by the Federal Reserve's minutes, which indicated the possibility of another interest rate hike before the end of the year.

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