Key events
More than half of UK first-time buyers paying more for mortgage than they did for rent
A majority of first-time UK buyers now pay more towards their monthly mortgage bills than they used to pay in rent, the estate agent Hamptons has found.
Last month 56% of first-time buyers said their monthly mortgage bills exceeded their previous rent, the highest proportion in at least a decade, according to Hamptons. They paid £39 more on average.
Mortgage rates have been climbing in the UK since the outbreak of war in the Middle East, as volatility in the bond markets has driven up the swap rates that affect the pricing of fixed-rate deals.
Earlier this month the average cost of a five-year fixed-rate mortgage hit the 6% barrier for the first time in three years. On Monday morning the average rate stood at 5.99%, while the average rate for a two-year fixed mortgage was 5.96%, according to the financial analyst Moneyfacts.
Chris Beauchamp, chief market analyst at investing and trading platform IG, said:
double quotation markInvestors worried about political flashpoints will be watching France nervously. Given the country’s precarious financial situation, the riots of recent weeks may only be a foretaste of what is to come should any government attempt to reform public spending.
While other European markets enjoyed a stronger period last week, the CAC continued its miserable performance. But betting on France’s recuperative powers has been the way to go in previous crises – can the Fifth Republic pull off a similar trick again?
The bond sell-off has worsened, as investors worry about the situation in France and Italy, where people have taken to the streets to protest over the rising cost of living and have clashed with police.
The yield, or interest rate, on the French 10-year government bond has jumped more than 10 basis points to 4.88%, but remains below the 4.99% hit in early October. The equivalent Italian yield leapt 8bps to 4.55%.
Meanwhile, US Treasury yields dipped slightly and stock futures pointed to a higher open on Wall Street later, as oil prices fell.
The benchmark S&P 500 index and the Nasdaq Composite posted their biggest weekly declines since late June on Friday amid rising concerns that higher interest rates could weigh on investments in AI infrastructure, particularly among data centre operators.
AI-linked stocks CoreWeave, Broadcom and Nvidia are up in pre-market trading today.
Brent crude, the global oil benchmark, dropped $1.39 a barrel, or 1.3%, at $108.47 a barrel, after Donald Trump waived some sanctions on Russia. Prices were down even more earlier, but Iran reported another tanker had hit a mine in the strait of Hormuz.
ShareUK consumer confidence falls to three-year lows as ‘Burnham bounce’ fades
UK consumer confidence has fallen to its lowest levels in more than three years, as people worry about inflation and interest rate hikes.
The S&P Global UK consumer sentiment index, a survey carried out since 2009 that is based on a panel of 1,500 UK households, shows that consumers have become increasingly downbeat in October.
The index fell for a third month, to 41.3 in October from 42.7 in September, marking the lowest level since July 2023. The index is made up of gauges tracking household financial wellbeing, labour market conditions, household spending, savings and debt.
Maryam Baluch, economist at S&P Global Market Intelligence, said:
double quotation markThe slump in household confidence to its gloomiest in more than three years, a time when inflation was still close to multi-decade highs, underscores the tough environment the government faces with the upcoming Budget.
Any ‘Burnham bounce’ has proved short-lived, eclipsed by the impact on the cost of living from events in the Middle East and the accompanying prospect of higher interest rates. October has brought a growing conviction among households that borrowing costs will rise imminently as the Bank of England seeks to tame inflation.
As a result, chancellor John Healey faces the challenge of setting a budget that will not ruffle bond market feathers while seeking to keep alive the promise that the government is serious about delivering stronger economic growth.
With consumer spending typically a key driver of the UK economy, clearly households will need to start feeling brighter about their financial prospects and job security than we’re seeing in the lead up to the Budget if hopes of stronger growth, let alone ‘growth in every postcode’, are to become anything more than wishful thinking.
Households’ financial sentiment fell to its lowest level in 40 months, driven by a sharp decline in expectations for finances over the next 12 months, which slid to the lowest since mid-2023.
Households also reported increasing strain on their current finances, with the latest deterioration the most pronounced since July 2023.
October marked a fifth consecutive month of pessimism about the job market. Although concerns eased slightly to signal only a modest level of negative sentiment, the pessimism contrasts with optimism seen earlier in the year.
ShareFrench markets slide after worst protests in years
French bonds and stocks have sold off, putting fresh pressure on the euro.
Widespread and increasingly violent protests across France have piled pressure on the government, which is struggling with weak economic growth and ballooning debt. It has yet to pass its budget for next year.
The euro fell nearly 0.4% against the dollar to $1.1201. Investors sold French government bonds, pushing yields higher.
The yield on the 10-year bond rose as much as 8 basis points to 4.86% while Germany’s 10-year yield, the benchmark for the eurozone, was flat at 3.41%. The gap between them widened to 145 basis points, the highest in two years, although below the near 160bps hit in early October, when the French 10-year yield hit 4.99%, its. highest since 2002.
The ratings agency Moody’s is due to review France’s credit rating on Friday, which could result in a downgrade, which would pile further pressure on bonds.
A protester wrapped in a French national flag stands in front of Lyon’s tourism office set on fire during a demonstration to protest against the “high cost of living”, in Lyon, southeastern France, on 17 October. Photograph: Jeff Pachoud/AFP/Getty Images
French stocks slid, with the CAC 40 index down nearly 1.3%, while the broad European Stoxx 600 index lost 0.6%. Two of France’s biggest lenders, Société Générale and BNP Paribas, fell by 2.5% and 2.2% respectively.
The Milan borsa fell almost 1.3% too. Investors worry that the jump in French yields could spill over into other heavily indebted parts of the eurozone. The Italian 10-year bond yield rose 5.7bps to 4.53%. Italy has also seen protests over the weekend, over fuel and food shortages.
Bastien Aillet and Hadrien Camatte, economists at French bank Natixis CIB, said:
double quotation markThe French public deficit is projected to widen to 5.4% of GDP in 2026, up from 5.1% in 2025. Although the government initially targeted a 5% deficit, several factors are expected to weigh heavily on state revenues because of lower-than-expected domestic economic activity.
For 2027, the government has announced a €54bn savings plan aimed at bringing the deficit down to 5% (as opposed to an estimated 6.4% without these consolidation measures). The scale of this effort is unprecedented outside of post-crisis recovery periods. This raises significant credibility questions, particularly given that:
► The National Assembly remains deeply fragmented, leaving the government without a clear majority to pass these measures as originally designed;
► The government’s 2027 GDP growth assumption of 1% appears optimistic compared to our own forecast of 0.8%.
For these reasons, we expect a deficit closer to 5.5% in 2027. Should this situation materialise in 2027, it would represent the fifth consecutive year that the government has registered a deficit exceeding 5% (the last deficit below this threshold being in 2022 at 4.7%).
Consequently, whilst France has experienced the largest increase in its debt-to-GDP ratio since the Covid-19 pandemic, it is also expected to record the sharpest rise over the next two years. Moreover, this ratio is expected to breach the 120% GDP threshold by the end of next year, representing the second-highest public debt-to-GDP ratio among the major euro area economies.
Going forward, the primary areas of concern remain the trajectory of structural spending (particularly social expenditure) and the cost of debt servicing which are expected to increase substantially in a no policy change scenario. Driven by the current high-interest rate environment, debt service charges could reach 4% of GDP by the end of the decade, compared to 2.2% in 2025.
ShareItalian protests over soaring fuel prices and food shortages
Lorenzo Tondo
There were also protests in Italy over the weekend over the rising cost of living, with clashes between police and protesters in Milan and roads blocked by lorry drivers in southern Italy.
Italian police clashed with protesters who threw stones and looted shops in Milan on Sunday during demonstrations over the rising cost of living, as lorry drivers blocked roads across southern Italy in protest at soaring fuel prices linked to the war in Iran, Lorenzo Tondo is reporting from Palermo.
Footage showed police in riot gear firing teargas and using water cannon after several hundred hooded protesters smashed shop windows and set bins alight in the area around Piazza del Duomo in central Milan.
Italian police officers in riot gear stand around a person lying on the pavement during unrest near Piazza del Duomo in Milan on 18 October. Clashes between protesters and police broke out during a demonstration against the rising cost of living on 17 October. Photograph: Matteo Corner/EPA
The clashes echoed scenes of violence in neighbouring France, where hundreds of thousands of people angered by rising living costs and declining public services took to the streets on Saturday in some of the country’s most violent protests in years.
Meanwhile, lorry drivers have caused widespread disruption across southern Italy, blocking major roads and creating huge traffic jams in Sicily, Puglia and Calabria in protest at the mounting financial pressure on the haulage industry.
Hundreds of petrol stations have run out of fuel, while supermarkets are beginning to report shortages of several products, particularly fresh food. Pharmacies have also been affected, raising concerns about disruption to essential supplies.
Pasquale Russo, president of Conftrasporto, an association representing Italian haulage companies, said:
double quotation markWe are asking the government to urgently convene a meeting with industry associations. Otherwise, we will consider a nationwide strike.
The situation is very concerning because the excessive price increases affecting the haulage industry have created a highly tense situation among transport companies, leading to spontaneous protests in some areas of the country.
In several parts of southern Italy, petrol stations have run out of both petrol and diesel, with motorists facing long queues at the few filling stations still operating. The road blockades have also caused extensive traffic disruption, with fears growing that prolonged protests could further disrupt supplies of food, fuel and other essential goods.
Share39th anniversary of Black Monday
Today is the 39th anniversary of Black Monday. The 1987 financial crash began in Hong Kong and quickly spread west to Europe, before hitting Wall Street, where the Dow Jones slumped by an unprecedented 23% to take the index 34% below its level earlier that October.
In London the FTSE 100 fell by 11% on the Monday, a further 12% on the Tuesday and another 6% on the Thursday; those who worked through the slide reported how the shock of share price slumps caused some traders to become paralysed, staring blankly at their screens, with “sweat running down their faces”.
It was not just the traders, either. Lord (Nigel) Lawson, then chancellor of the exchequer, recalled later:
double quotation markMy reading of it at the time was that the Wall Street collapse and collapse of other stock markets around the world had rattled the Bank of England and they were in a bit of a state of panic. My judgment at the time was that they weren’t thinking straight as they were panicked by what was going on in the financial markets.
History now tells us that shares swiftly recovered: two years later London’s blue-chip index was trading again at 1987 highs, and subsequently soared away during the 1990s. Unlike now there was no banking crisis to transmit the problems to the real economy. In fact, Black Monday was merely the pricking of a stock market bubble – a financial market crisis for sure, but not an economic one.
Deutsche Bank analyst Jim Reid says today:
double quotation mark39 years ago today we woke up to the origins of what would forever be known as Black Monday, where the Dow fell -22.6% on the day.
It’s rare the anniversary falls on a Monday so it’s a more memorable one today.
The late US trading session on Friday almost felt people were worried we’d get a repeat today as the S&P fell from flat just before the European close to -1.09% by the US one. However, this morning we are seeing a bounce with S&P (+0.79%) and Nasdaq (+1.29%) futures making up most of their late Friday losses.
Clearly the main nervousness last week was around AI-related names, with credit markets starting to show some distress in that sector.
Updated at 05.31 EDT
Here’s our full story:
France was hit by a fresh wave of selling in its bond and stock markets on Monday after violent protests over the weekend left public buildings burned, hundreds of shops looted and thousands of arrests across the country.
ShareFrench and Italian stocks tumble as French bond sell-off deepens
The French and Italian stock markets have both tumbled more than 1%, while the sell-off in French government bonds deepened.
This has pushed the yield, or interest rate, on the benchmark 10-year bond up by 7.5 basis points to 4.855%.
The Stoxx 600 index of Europe’s leading shares is down 0.4%. The UK’s FTSE 100 lost 0.6% or 66 points to 10,815, while the German market slid 0.7%.
Deutsche Bank analyst Jim Reid said:
double quotation markFrance’s political and fiscal problems gained another complication over the weekend as nationwide cost-of-living protests descended into some of the country’s worst unrest in years. Around 550,000 people demonstrated on Saturday according to the Interior Ministry, although the CGT [Confédération Générale du Travail trade union] put the figure at 800,000, and the violence continued into Sunday with fresh clashes in Paris and Marseille. The latest official figures put arrests at 2,400 and police injuries at nearly 1,000.
This won’t make it easy for the international community to be totally comfortable buying OATs, so the modest recovery in French spreads over the last week or so will be tested today. In a televised address last night, President Macron appealed for calm, saying France felt “anger and shame” at the violence.
He stopped short of declaring a state of emergency, but said prefects could ban protests where necessary to protect public buildings and businesses, while distinguishing peaceful demonstrators from ultra-left groups and criminals blamed by the government for the rioting. With France already facing a difficult fiscal backdrop and the 2027 election approaching, the weekend adds another layer of political risk for markets.
Updated at 03.46 EDT
Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, has looked at the Chinese GDP figures.
double quotation markPolicymakers are likely to view their efforts to stabilise headline growth in the third quarter as successful, despite persistent structural imbalances and weak underlying domestic demand.
Headline industrial production rose in September partly as coal mines resumed operations after safety inspections prompted by a major accident. Manufacturing output growth remained robust at 6.0% year on year in September, buoyed by stronger export demand for electronics, AI-related equipment and autos.
High-tech manufacturing output continues to outperform traditional sectors, as China climbs the value-added ladder.
Policymakers will probably feel confident that China can hit the 4.5-to-5% annual growth target, as targeted policy support gains traction in Q4. This includes policy bank funding for local infrastructure and manufacturing investment – with 550bn renminbi of the 800bn renminbi annual quota still to come – fiscal subsidies for mortgage interest payments and 550bn remminbi in additional local government bond quota.
This round of targeted support will provide only a modest short-term boost before soft underlying soft domestic demand reasserts itself, notably through falling property construction and muted household spending. Policymakers will continue to prioritise promoting innovation and high-tech sectors over short-term growth in 2027. Export growth is likely to slow as trade friction intensify, increasing the need for further targeted support.
Updated at 03.46 EDT
Introduction: Roaring exports lift China’s economic growth; violent French protests put pressure on euro and bonds
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Roaring exports lifted China’s economic growth in the third quarter despite lacklustre consumer spending, which lagged far behind factory output.
The country’s GDP grew by 4.5% year on year between June and September, better than economists had expected and up from the second quarter’s 4.3%. The economy grew by 4.6% in the first nine months of the year, putting it on track to hit the government’s 2026 target of 4.5% to 5% growth without extra stimulus measures.
Industrial production rose 5.5% in September, up from 5.2% in August, while retail sales increased 1.1%, up from 0.4%.
However, fixed-asset investment fell 7.2% over the first nine months, property investment tumbled by 20.6%, and infrastructure spending remained weak.
Analyst Stephen Innes said:
double quotation markThe headline GDP number tells you the economy is still moving forward; the internals tell you the factory floor is doing most of the running while households, property and investment are still somewhere behind looking for their shoes.
Contracting fixed investment and another deep property decline leaves the domestic economy badly out of step with the factory sector.
The semiconductor boom is increasingly a price story rather than a volume story…
Beijing now has less urgency to ease aggressively, but unless local demand catches up, China remains dependent on the rest of the world absorbing what its factories produce, bringing the trade imbalance increasingly into view.
In Asian stock markets, Japan’s Nikkei fell 0.6% while China’s CSI 300 rose 0.2%, Hong Kong’s Hang Seng climbed 0.5% and South Korea’s Kospi added 1.5%.
Increasingly violent street protests in France have put pressure on the euro, while French bonds sold off, pushing yields higher, ahead of a bond auction later in the day.
The yield, or interest rate, on the 10-year French government bond rose more than 6 basis points to 4.842%. The European single currency dipped 0.2% to $1.1218 versus the dollar.
The spread between 10-year German and French government bonds has widened by 6.5 basis points, indicating the premium investors pay for French debt over what is considered ultra-safe German debt.
The Agenda
Updated at 03.13 EDT