France under pressure, the Middle East on fire: Wall Street holds firm amid high interest rates and a housing crisis.
Political variables are weighing on markets as much as economic data. Protests in France are questioning investors about the sustainability of European public finances, while the war in the Middle East continues to impact energy prices. Wall Street is regaining momentum thanks to technology and corporate earnings, despite high interest rates. Meanwhile, China and the United States are showing signs of a housing crisis.
France: Social crisis becomes a problem for European debt
The demonstrations that erupted into riots have accentuated a pre-existing French weakness: the difficulty of reconciling fiscal discipline and social consensus. A politically weakened government risks failing to approve credible measures to reduce the deficit.
The yield on 10-year French government bonds rose close to 4.96% , while the spread with respect to German Bunds hovered around 150 basis points . The political risk premium is increasingly evident. The pressure spread to the Paris stock exchange, with the CAC 40 falling 0.38% , and contributed to the weakness of the STOXX 600, which fell 0.14% . The fear is that France's difficulties will reopen a broader debate on the resilience of eurozone sovereign debt.
Hormuz and Yemen: Energy Risks Return to the Forefront
The main geopolitical factor remains the Middle East. Iranian authorities reported that an oil tanker exploded after hitting a mine in the Strait of Hormuz, but the circumstances of the incident have not been independently confirmed. The route's insecurity, however, has concrete economic consequences: more expensive insurance, slower transport, and increased volatility in crude oil prices.
Adding to the concerns are the Houthi operations, which have claimed responsibility for attacks against Saudi oil and airport targets. Riyadh has not confirmed some of the claims, but the risk to supplies is growing. Egypt's involvement, which has announced its willingness to militarily support Saudi Arabia, further increases the regional risks, especially for the security of the Red Sea and Bab el-Mandeb.
Brent crude temporarily surpassed $110 a barrel before falling back. This oscillation describes the market: every diplomatic signal mitigates the geopolitical premium, but the vulnerability of energy routes prevents true normalization.
Ukraine: Uncertainty also concerns Western support
On the Russian-Ukrainian front, tensions are no longer limited to the progress of military operations. Volodymyr Zelensky has criticized delays in US arms deliveries and restrictions on information sharing, while the easing of some measures against Russian energy has reinforced the perception of divergence between Washington and Kyiv.
For markets, these frictions make it more difficult to predict the duration of the conflict and the stability of European and Russian energy exports. Diplomacy remains unpredictable, with potential impacts on prices, industry, and confidence.
Wall Street recovers, Europe lags behind
Despite the international environment, US stocks are showing greater resilience than European ones. Following the correction in artificial intelligence-related stocks, the Nasdaq gained 1.1% on Monday, while the S&P 500 rose 0.4% . On Tuesday, with trading still ongoing, the Dow Jones also rose around 0.94% , boosted by encouraging corporate results and a temporary cooling in yields.
Questions remain about technology valuations. Investors are beginning to demand more concrete evidence of the profitability of the huge investments in AI. However, the comparison with Europe is significant: in the United States, earnings growth is supporting the indices, while in Europe, political shocks and rising energy costs are limiting risk appetite.
China: Solid growth, fragile real estate foundations
Chinese data show an economy advancing at varying speeds. Third-quarter GDP grew 4.5% year-on-year, above expectations, supported by industrial production and high-tech exports. However, this figure masks structural imbalances.
In the first nine months of the year, real estate investment fell by 20.6% and overall fixed asset investment by 7.2% . This divergence between a competitive manufacturing sector and weak domestic demand makes the recovery uneven. For industrial raw materials, the combination is ambivalent: technology is supporting some metal consumption, while construction continues to dampen demand for traditional materials.
US Real Estate and Bonds: The Cost of Money Presents the Bill
Signs of fatigue are also appearing in the United States. Pending home sales fell 7.3% month-over-month, while 30-year mortgages reached an average rate of 7.40% . The problem extends beyond housing: when buying a home becomes more difficult, consumption, construction, and financing are affected.
Weak data has caused the 10-year Treasury yield to decline toward 5.10% , providing temporary relief for equities. In Japan, the auction of 20-year government bonds attracted demand at 5.84 times the amount placed, a sign that high yields can attract capital even in a climate of risk aversion. There is no indiscriminate flight from bonds: investors are increasingly distinguishing between credit quality, remuneration, and institutional stability.
A new hierarchy of risks
The current situation isn't simply a clash of strong stock markets and weak economies. Rather, it shows markets capable of rewarding growth, but increasingly unwilling to ignore fiscal and geopolitical risks. France is testing confidence in European debt, Hormuz is a reminder of how energy can impact inflation and interest rates, while China and the United States are revealing the fragility of their respective real estate markets. The real deciding factor in the coming months will be the ability to transform profits and innovation into sustainable growth, without underestimating the cost of uncertainty.