European stocks rise as French debt fears ease and ECB tempers inflation concerns

European stocks climbed 1% on Tuesday, recovering some ground after a tumultuous start to October. The Stoxx Europe 600 index rose, marking its first gain after three days of limited movement. Investors digested last week’s sharp sell-off in French government debt, which had rattled markets. Germany’s index gained 0.9%, while France’s added 0.7% after a steep 1.1% drop the previous day. Spain’s index surged 1.2%, shrugging off news of a snap election.

The recent volatility in bond markets had widened French-German yield spreads to crisis-era levels, weighing on equity valuations. However, French sovereign yields stabilized after the government’s 2027 draft budget release, easing some investor concerns. ECB Chief Economist Philip Lane offered a cautious outlook, noting that high energy prices had not yet sparked widespread inflation across the Eurozone. He emphasized uncertainty over how strongly energy costs would pass through to broader prices.

Global markets faced a shaky start to the fourth quarter, with surging bond yields and Middle East tensions driving risk aversion. Crude oil prices dipped nearly 2% overnight but stabilized as Middle East export volumes showed signs of recovery. Saudi Arabia resumed operations on key pipelines, while G7 nations pledged to boost energy supply to mitigate shortages. Meanwhile, investors are eyeing the upcoming third-quarter earnings season for clues on corporate resilience amid rising costs and debt pressures.

Among individual movers, Genmab jumped 8% after positive trial results for a lymphoma treatment developed with AbbVie. Recordati surged nearly 2% following a higher takeover bid from private equity firm CVC. TUI rose 4% after J.P. Morgan initiated coverage with an “overweight” rating. Telecom Plus gained 4% on strong customer growth.