France's economy unexpectedly shrinks by 0.1% as inflation hits its highest level since late 2023 and recession looms

France's economy minister Roland Lescure admitted the country faces "an unprecedented combination of external and internal shocks" after GDP shrank 0.1% when analysts had forecast a 0.1% rise. Exports fell 1.7%, dragged down by a 9.1% collapse in transport equipment sales, while investment contracted for a second straight quarter. French government borrowing costs jumped immediately after the data landed, with 10-year bond yields rising to 4.944%.

The European Central Bank has hinted at a December rate hike, warning that energy costs from the Iran war are fuelling eurozone inflation risks.