Global stocks rose on Friday as a sharp sell-off in government bonds and currencies showed signs of easing, while falling oil prices offered some relief to investors ahead of a closely watched U.S. jobs report that could influence expectations for the Federal Reserve’s next interest-rate decision.
The improvement in risk sentiment followed weeks of turbulence across global bond markets, where rising energy prices, persistent inflation concerns and deteriorating public finances have pushed government borrowing costs higher.
In Europe, longer-dated sovereign bonds advanced, although the gains were uneven. Investors favored German debt, widely viewed as a relative safe haven within the euro zone, while bonds issued by more heavily indebted countries such as France and Italy lagged.
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Germany’s 10-year government bond yield, the benchmark for the euro zone, fell 10 basis points to around 4.84%. Bond yields move inversely to prices.
France’s 10-year yield was little changed at 4.939%, widening the spread between French and German borrowing costs to more than 150 basis points. That was the largest gap since the euro zone debt crisis in 2011, highlighting growing investor concern about France’s fiscal position.
“I wouldn’t call it a crisis yet, but it looks like it has the potential to be one,” said George Lagarias, chief economist at Forvis Mazars.
“If it goes on for a couple more weeks then we’ll be talking about a crisis in the bond market.”
The widening divergence between Germany and France shows how investors are increasingly differentiating between sovereign borrowers rather than treating European government bonds as a single asset class. Germany’s relative fiscal position has made its debt more attractive as investors seek protection from rising deficits and political and fiscal uncertainty elsewhere.
Oil Retreat Gives Markets Some Breathing Room
The bond-market pressure has intensified in recent weeks as the conflict between the United States, Israel and Iran pushed energy prices higher, threatening to reinforce inflation while adding to pressure on already stretched government finances.
Oil prices, however, moved sharply lower on Friday.
U.S. West Texas Intermediate crude futures fell 3.8% to $89.34 a barrel, while Brent crude declined 2.5% to below $100. European gasoil futures, a key benchmark for diesel prices, dropped about 5% to $1,382.75 a metric ton.
The retreat in energy prices provided some relief to both equity and bond markets as investors focused on signs that supplies from the Middle East were recovering. European countries were also discussing a proposal to release additional diesel stockpiles to ease pressure on fuel markets.
The significance extends beyond the oil market. A sustained increase in energy prices would complicate the inflation outlook by raising transportation, manufacturing, and household costs, potentially limiting the ability of central banks to reduce interest rates. A decline in crude and diesel prices, by contrast, reduces some of that immediate inflationary pressure.
That dynamic has become necessary for the Federal Reserve as investors try to determine whether monetary policy will remain restrictive or become more supportive of economic growth.
Payrolls Become The Next Major Market Test
The next major catalyst was the U.S. employment report for September, due later Friday. Economists were expecting nonfarm payrolls to increase by about 90,000, while the unemployment rate was forecast to remain at 4.1%.
The data could have an immediate impact on expectations for the Federal Reserve’s next move. Markets were pricing only about a 25% probability of another rate increase this month, after two senior policymakers said this week that they wanted more economic data before deciding how to proceed. A rate move in December remained fully priced in.
“With the Fed now myopically focused on inflation and price pressures, a hot wages print could prove particularly influential for US rates, Treasuries and the USD,” said Chris Weston, head of research at Pepperstone.
“Risk assets have so far absorbed the rise in US real yields, and long-end nominal Treasury yields remarkably well. However, a sustained increase in term premium could be far more problematic.”
Against that backdrop, the composition of the employment report has become as important as the headline payroll number. Strong wage growth could reinforce concerns about persistent inflation and push Treasury yields and the dollar higher, while weaker labor-market data could strengthen expectations for easier monetary policy.
European equities advanced, with the pan-European STOXX 600 rising 0.8%. The index was nevertheless heading for a weekly decline of roughly 1%.
U.S. equity futures also pointed to a stronger opening, with Nasdaq 100 futures up 0.7% and S&P 500 futures gaining 0.5%.
Asia was less resilient. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1% on Friday, leaving it down 1.3% for the week. Japan’s Nikkei declined 0.9% on the day but still gained almost 3% over the week.
Mainland Chinese markets remained closed for a public holiday, while Hong Kong’s Hang Seng Index fell 2.7% following its return from a holiday.
Dollar Strengthens As Investors Seek Safety
The turmoil in European sovereign debt markets also appears to have redirected some safe-haven demand toward U.S. Treasuries, the dollar, yen and Swiss franc.
The euro fell to $1.1231, extending losses after declining 0.8% Thursday to reach its lowest level since May 2025.
The U.S. dollar index, which measures the currency against six major peers including the euro and Swiss franc, stood at 102.03, slightly higher on Friday after gaining 0.6% in the previous session to reach its highest level since April 2025. The index was on track for a third consecutive weekly gain of about 1%.
The dollar’s resilience is significant because it comes even as U.S. fiscal concerns remain a major source of volatility in global bond markets. For now, however, the currency is benefiting from its traditional safe-haven role as investors reassess risk across Europe and emerging markets.
The Japanese yen strengthened 0.2% to 157.61 per dollar after data showed underlying inflation in Tokyo accelerated to an annual rate of 2.7% in September. The stronger inflation reading reinforced expectations that the Bank of Japan could raise interest rates further.
Taken together, the moves in bonds, currencies and commodities point to a market still dominated by inflation and fiscal risks rather than a straightforward recovery in risk appetite.