European shares drop on inflation and bond yields as Brent falls to $98.50

European equities slide on inflation and bond yields

European equity markets opened the fourth quarter in negative territory on 1 October 2026, driven down by elevated government bond yields and sticky inflation linked to energy disruptions in the Middle East. Early trading saw the Paris CAC 40 drop 1.3%, the Frankfurt DAX fall 1.2%, and the Milan FTSE MIB decline 1.0%. The retreat extended losses from the previous session on 30 September, when Paris dropped 0.89%, Milan slipped 0.84%, Frankfurt fell 0.79%, and London dropped 0.24% following rising inflation data across Italy, Germany, and France. On the Amsterdam exchange, natural gas prices rose sharply to just under 73 euros per megawatt-hour at the close of September. By contrast, Asian markets advanced, with the Nikkei 225 closing up 3.3% following quarterly financial results reported by American chipmaker Micron.

Diverging central bank expectations and US data

Market participants continue to evaluate prospects for additional rate increases before the end of the year by both the European Central Bank and the US Federal Reserve. According to the CME FedWatch tool, market expectations for a Federal Reserve rate increase in October dropped to 37%, down from 71% a week earlier. The shift followed United States economic releases showing second-quarter gross domestic product growth revised upward to 2.2% and core PCE inflation moderating to 3.4% in August from 3.7% in July. Wall Street indexes responded positively to those indicators on 30 September, with the Nasdaq advancing 1.0%, the S&P 500 gaining 0.5%, and the Dow Jones Industrial Average closing flat. European market participants turned their attention to United States labor data scheduled for release on 1 October.

The market awaits data relating to unemployment benefits which are at historically extremely low levels.

Crude oil falls as Persian Gulf flows recover

Commodity markets registered divergent price movements on 1 October as Brent crude oil declined beneath 100 dollars per barrel. December Brent crude futures dropped 4.5% to 98.50 dollars per barrel, retreating from 103.70 dollars per barrel recorded on 30 September. The downturn followed reports that maritime oil shipments from the Persian Gulf recovered over the prior week to volumes near pre-conflict levels. West Texas Intermediate crude moved in the opposite direction, gaining 1.5% to trade at 91.70 dollars per barrel. Currency markets saw the euro weaken to 1.1307 dollars, reflecting cautious sentiment surrounding European economic growth and ongoing energy costs.

Tech gains buffer Milan amid corporate banking shifts

In Milan, technology and industrial shares advanced despite the broader index decline. STMicroelectronics gained 0.9% while Technoprobe rose 2.0%, building on a 2.17% gain recorded during the previous session on 30 September. Prysmian climbed 2.1% after Deutsche Bank analysts projected solid quarterly results based on demand for data center cabling, while Fincantieri rose 1.5% and Campari added 1.2%. Financial shares declined broadly, with UniCredit falling 2.0%, Banco BPM losing 1.9%, Banca Generali sliding 1.7%, Mediobanca dropping 1.6%, and Monte dei Paschi di Siena falling 1.2%. Monte dei Paschi clarified that its two takeover bids for Banco BPM and Banca Generali will be voted on separately from the acquisition of Mediobanca's 13.3% stake in Generali at its 29 October shareholder meeting, a transaction that would leave the combined group with an 8.8% stake in Generali and distribute an extraordinary dividend. In Germany, Commerzbank shares fell 1.5% after German media reported that trade unions expressed willingness to cooperate with UniCredit following two years of opposition. Banca Ifis dropped 1.29% after the Bank of Italy requested a restructuring of its board of directors, extending the stock's year-to-date loss to nearly 50%, while Telecom Italia fell 2.58% on 30 September during its first trading day under Poste Italiane control.