European markets steadied on Wednesday 11 November 2026 as a sell-off in global bonds followed hotter-than-expected US inflation data, while traders weighed the risk of a bigger interest rate rise from the Federal Reserve next month.

European stock futures gained 0.6 per cent in early trading, according to Reuters, pointing to a firmer open across the region after a mixed session on Tuesday. In London, the FTSE 100 was trading at about 10,819 in early indications, after closing down 0.29 per cent at 10,751.59 on Tuesday.

The pan-European STOXX 600 closed 0.27 per cent higher at 658.32 on Tuesday, within 0.8 per cent of its record high reached in early August, as falling oil prices and easing Middle East tensions supported risk appetite.

Bonds tumble as Fed hike fears grow

Bond markets bore the brunt of the reaction to the US inflation figures. Global bonds tumbled and the dollar stayed firm after the data raised the risk of an outsized half-point rate rise from the Federal Reserve in December, Reuters reported.

Core US inflation ran at a monthly rate of 0.3 per cent in October, higher than the 0.2 per cent forecast. Before the data landed, Fed Governor Christopher Waller said a core reading of 0.3 per cent would prompt him to consider a 50-basis-point rise at the Fed's next meeting in December.

Dallas Fed President Lorie Logan said two more rate rises were needed, possibly rapidly, and Chicago Fed President Austan Goolsbee warned of a "real inflation issue", while Philadelphia Fed President Anna Paulson called for gradual rate rises.

Two-year US Treasury yields surged 18 basis points overnight and stood at 4.7482 per cent in Asian trading on Wednesday, while the 10-year yield rose to 4.9958 per cent, close to 5 per cent. Bonds in Asia were also sold off, with Japan's 10-year government bond yield up 7 basis points to 2.755 per cent and Australia's up 6 basis points to 5.05 per cent.

Markets price in more rate rises

Fed funds futures now imply a quarter-point move in December is essentially locked in, with a 10 per cent probability of a 50-basis-point rise, Reuters reported. A total of three quarter-point moves are fully priced in by the middle of next year.

David Mericle, chief US economist at Goldman Sachs, said the bank still expected a second 25-basis-point rise in December, but was adding a third to its forecast for March 2027, which would take the federal funds rate to a peak of 4.25 to 4.5 per cent.

"Despite Waller's comment, we continue to expect a second 25bp rate hike in December because we suspect that most FOMC voters would hesitate to jump to a 50bp hike," Mericle said.

Europe looks to German inflation and Lagarde

Attention in Europe turns to Germany's final October inflation figures and a speech by European Central Bank President Christine Lagarde later on Wednesday, both of which could shape expectations for eurozone rates.

The dollar's rise also hit commodities. The dollar index gained 0.5 per cent overnight and edged up another 0.1 per cent on Wednesday to 102.29, while gold fell 2.6 per cent overnight before edging up 0.2 per cent to $4,030.56 an ounce. Brent crude futures rose 0.7 per cent to $92.16 a barrel on Wednesday after two days of losses, having dropped as low as $89.16 overnight.

US stock futures pointed to a steadier open, with Nasdaq futures up 0.5 per cent and S&P 500 futures up 0.2 per cent. AI infrastructure firm CoreWeave reported revenue up 168 per cent, sending its shares up 8 per cent in extended trading, while Nvidia steadied after two days of steep losses wiped about $430 billion from its market value.

European investors will be watching whether the region's markets can hold near record levels if bond yields keep climbing, or whether higher borrowing costs start to bite into the rally.