Why European Banks Are Leading Today's Rally—And What's Next

French equities are having a solid day. The CAC 40 is up 0.66% to 8,006 points, bouncing back from recent weakness as investors digest Nvidia’s stronger-than-expected earnings and guidance. The AI mega-cap’s better performance has temporarily lifted pressure off tech valuations—a win for risk sentiment.

The Winners: Banking stocks are in the spotlight: BNP Paribas surging 5%, Societe Generale and Credit Agricole both climbing 1.4-2%. Legrand (+3%) and Thales (+1.4%) are also making moves. Broader strength in Airbus, TotalEnergies, LVMH, and Schneider Electric shows money rotating across sectors.

The Losers: Auto and semiconductors are struggling. Stellantis down 2.2%, Renault off 1.8%, STMicroelectronics sliding 2%. Discretionary and materials are mixed—Hermes, Accor, Michelin all down fractionally.

What’s Actually Moving Markets: Eurostat just dropped construction data that’s raising eyebrows. EU construction output fell 0.5% in September—the second straight monthly decline. Year-over-year? Down 0.3%, reversing August’s +1% growth. Translation: the economic engine is slowing.

Here’s the tension: Nvidia’s beat is easing tech fears short-term, but weak European construction signals slower growth ahead. All eyes now pivot to U.S. jobs data—the Fed’s next rate move hinges on what that number shows. Banking rallies on talk of lower rates, but if recession fears spike, this bounce could be short-lived.

The Setup: This is a “risk-on before risk-off” type of day. Enjoy the bank stocks while they last, but watch that U.S. labor market print like a hawk.