Spanish assets underperform amid CPI data

EU Market Update: Spanish assets underperform amid CPI data, Catalonia's referendum plan and concerns related to PIMCO; CPI data from German states largely flat to slightly higher vs prior month

Notes/Observations

- Sept CPI for German states generally shows acceleration for the y/y rates

- Spain CPI decline slows in Sept amid stabilization in food prices

- Bund yields rise as Saxony CPI accelerates but German paper supported by equity declines and wider spreads; Peripheral debt spreads widen as Spanish bonds underperform amid CPI data, Catalonia referendum news and recent news related to PIMCO (departure of Bill Gross)

- (ES) EU Almunia: Spain region Catalonia to be outside of EU if they secede - press

- Belgium y/y CPI turns negative in Sept for the first time since late 2009

- Key event risks for the week include ECB meeting, Euro Zone CPI, UK PMI data and monthly US payrolls report

- The FX theme of US dollar strength continues; NZD drives underperformance in commodity currencies on intervention concerns

- Spanish equities underperform; UK miners weighed down by lower commodity prices

- Hong Kong's Hang Seng declines sharply amid 'Occupy Central' protests; China credit default swaps widen

- (CN) FX regulator SAFE: Two way yuan movement is going to be a 'new normal'; yuan may remain attractive for carry-trade

Key Economic Data in session

- (DE) GERMANY CPI NORTH RHINE WESTPHALIA M/M: 0.0% V 0.1% PRIOR; Y/Y: 1.1% V 1.1% PRIOR

- (DE) GERMANY CPI BRANDENBURG M/M: 0.0% V 0.0% PRIOR; Y/Y: 0.9% V 0.9% PRIOR

- (DE) GERMANY CPI HESSE M/M: 0.1% V 0.0% PRIOR; Y/Y: 0.8% V 0.7% PRIOR

- (DE) GERMANY CPI BAVARIA M/M: 0.1% V 0.1% PRIOR; Y/Y: 0.8% V 0.8% PRIOR

- (DE) GERMANY CPI SAXONY M/M: 0.1% V 0.0% PRIOR; Y/Y: 0.9% V 0.8% PRIOR

- (ES) SPAIN SEPT PRELIMINARY CPI Y/Y: -0.2% V -0.2%E; CPI EU HARMONIZED Y/Y: -0.3% V -0.3%E

- (EU) EURO ZONE SEPT BUSINESS CLIMATE INDICATOR: +0.07 V +0.10E; CONSUMER CONFIDENCE: -11.4 V -11.4E

- (PT) PORTUGAL SEPT CONSUMER CONFIDENCE INDEX: -24.6 V -25.5 PRIOR; ECONOMIC CLIMATE INDICATOR: 0.7 V 0.7 PRIOR

- (UK) AUG M4 MONEY SUPPLY M/M: 0.3% V 0.2% PRIOR; Y/Y: -1.5% V -1.0% PRIOR; M4 EX IOFCS 3M ANNUALIZED: 3.1% V 3.4% PRIOR

- (UK) AUG NET CONSUMER CREDIT: £0.9B V £0.8BE; NET LENDING SEC. ON DWELLINGS: £2.3B V £2.1BE

- (UK) AUG MORTGAGE APPROVALS: 64.2K V 65.0KE

- (ES) SPAIN AUG ADJUSTED RETAIL SALES Y/Y: +0.4% V -0.8%E; RETAIL SALES (UNADJ) Y/Y: -0.9% V -0.2% PRIOR

Fixed Income

- (IT) ITALY DEBT AGENCY (TESORO) SELLS €8.4B V €8.5B INDICATED IN 5-YR, 10-YR BTPS AND 10-YR CCTEU BONDS

Equities

Indices [Stoxx50 -0.4%, FTSE 100 -0.3% at 6,626, DAX -0.3% at 9,465, CAC-40 -0.3% at 4,379, IBEX-35 -0.7% at 10,776, FTSE MIB -0.7% at 20,659, SMI -0.1% at 8,768, S&P 500 Futures -0.4% at 1,967]

Market Focal Points/Key Themes: European equity markets open mixed amid the release of CPI data out of Germany and Spain, Spain's IBEX underperforms, Balfour Beatty issues another profit warning, Slight rebound for shares of Allianz

By Sector

Financials [Commerzbank CBK.DE -2% (regulatory probe in NY)]

Industrials [Balfour Beatty BBY.UK -23% (profit warning)]

Basic Materials/Resources [SGL Carbon SGL.DE -5% (rights offering)]

Stoxx50 sectors [Utilities -1%, Consumer Cyclical -1%, Basic Materials -0.7%, Industrials -0.5%, Energy -0.5%, Consumer Non-Cyclical -0.4%, Financials -0.2% Telecom -0.1%, Technology flat]

FIXED INCOME/FX/COMMODITIES

Currencies/Fixed Income:

- Most of the Asia and Emerging markets currencies are weaker against the USD after protests in Hong Kong lead a flight to safety. European peripheral bond yields are higher as traders begin to digest the ramifications of 'bond king' Bill Gross' departure from PICMO

- EUR/RUB - Trades over 1.1% higher on the session through the technical 50.00 level amid weakness in the Ruble due to lower oil prices and emerging markets fears stemming from Hong Kong protests

- USD/SEK the Krone strengthen briefly on better than expected retail sales but trade quickly back to flat

- USD/CNY Yuan has its largest one day drop since March on back of unrest in Hong Kong

Looking Ahead

- 06:00 (IE) Ireland Aug Retail Sales Volume

- 06:00 (IL) Israel to sell 2017, 2023 and 2024 bonds

- 06:00 (TR) Turkey Bond Sale

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Sept FGV Inflation IGPM M/M: No est v -0.3% prior; Y/Y: No est v 4.9% prior

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (DE) Germany Sept Preliminary CPI M/M: -0.1%e v 0.0% prior; Y/Y: 0.8%e v 0.8% prior

- 08:00 (DE) Germany Sept Preliminary CPI EU Harmonized M/M: -0.1%e v 0.0% prior; Y/Y: 0.7%e v 0.8% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Aug Personal Income: No est v 0.2% prior; Personal Spending: No est v -0.1% prior

- 08:30 (US) Aug PCE Deflator M/M: No est v 0.1% prior; Y/Y: No est v 1.6% prior

- 08:30 (US) Aug PCE Core M/M: No est v 0.1% prior; Y/Y: No est v 1.5% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined € in 3-month, 6-month and 12-month Bills

- 09:00 (US) Fed's Evans speaks at Economics Conference in Chicago

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:45 (UK) BOE reverse auction; to purchase £1.6B in 3-7 year Gilts (residual)

- 10:00 (US) Aug Pending Home Sales M/M: No est v 3.3% prior; Y/Y: No est v -2.7% prior

- 10:30 (US) Sept Dallas Fed Manufacturing Activity: No est v 7.1 prior

- 11:00 (US) Fed to purchase $2.00-2.50B in Notes

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 16:00 (US) Crop Condition Report

- 19:30 (JP) Japan Aug Jobless Rate: No est v 3.8% prior

- 19:50 (JP) Japan Aug Retail Sales M/M: No est v -0.5% prior; Y/Y: No est v 0.5% prior; Large Retailers' Sales: No est v -0.6% prior

- 19:50 (JP) Japan Aug Preliminary Industrial Production M/M: No est v % prior; Y/Y: No est v % prior

- 21:45 (CN) China Sept Final HSBC Manufacturing PMI: No est v ## prior