Report published October 2, 2026

Early Morning Reid: Macro Strategy – Deutsche Bank (October 2, 2026)

Deutsche Bank · October 2, 2026

European financial markets started Q4 with acute sovereign contagion and banking weakness, prompting a sharp drop in yields and paring of ECB rate hike expectations. In contrast, US assets proved resilient after intraday yield spikes reversed following dovish FOMC commentary.

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Key Takeaways

1.European financial markets experienced severe stress reminiscent of the Euro crisis, driven by widening sovereign spreads and sharp declines in European banks.
2.Growing financial stress and surging energy prices led investors to pare back expectations for further ECB rate hikes before year-end, spurring a sharp rally in short-term German Bunds.
3.US markets diverged from Europe as dovish comments from FOMC officials reversed an early yield spike, keeping focus squarely on the September US nonfarm payrolls report.

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Key figures extracted from this report

Metric	Estimate	Context
Franco-German 10yr yield spread daily change	13.9 bps	Biggest daily jump since March 2020 at the height of Covid turmoil.
Italian 10yr spread to Bunds daily change	15.9 bps	Biggest daily jump since July 2022 when the ECB delivered its first rate hike in over a decade.
German 2-year yield	3.07%	Biggest drop since April as ECB hike expectations were scaled back.
US 10-year Treasury yield intraday high	5.34%	Hit highest intraday level since 2002 following hawkish US data before reversing in the afternoon.
US Initial Jobless Claims	197000 claims	Fell to a 10-week low vs 200k expected.