German bond yields edged higher yesterday, but the moves were limited and trading volumes were depressed in general due to the US holiday. Finnish and French bonds saw minor pressure early yesterday on the back of negative rating news late on Friday, but that pressure evaporated during the day. Intra-Euro-area spreads in general ended the day slightly wider, though Portuguese and Greek bonds saw a bigger widening.
European equities ended the day close to flat, but the more interesting price action took place in the US again. US equities felt early weakness, tried to recover, but then took large losses again towards the close. S&P 500 finally ended the day lower by 1.65%, the third 1%+ loss in a row and the fifth fall in the past six days. This left the index at levels last seen in May. The technical picture for equities has darkened clearly, and more losses are likely ahead today. So far, S&P 500 has fallen by only around 7% from its highs.
Asian equities are trading with more limited moves this morning, except for Japan, where prices are sharply lower (largely due to playing catch up after yesterday’s holiday). Europe is set to open down.
Core bonds are set to rally again today. The 10-year US Treasury yield has already fallen by around 4bp in Asian trading overnight, and German bonds should see gains as well this morning.
Catalonian November referendum scrapped?
Catalan President Mas is set to hold a press conference today at 10:00 CET to outline the Catalan plans for an independence referendum on 9 November. He looks likely to call the referendum off due to strong opposition from the Spanish government and a negative stance from the constitutional court. Mr Mas may decide to call early elections instead, which would at the very least put the referendum question on ice for a while. Such an outcome would be mildly positive for Spanish bonds.
UK CPI, Euro-area industrial production numbers and corporate earnings
Even a slight pick-up in UK September inflation at 10:30 CET should not change the picture of still limited price pressures. Euro-area August industrial production and the German ZEW at 11:00 CET, in turn, will look ugly and increase Euro-area recession talks. Further, French September inflation data will be out at 8:45 CET and Spanish data at 9:00 CET. In the US, the NFIB small business optimism index will be released at 13:30 CET.
In addition, EU finance ministers will meet to discuss the draft 2015 budget at 9:00 CET, while the European Court of Justice will hear arguments in a case challenging the legality of the ECBs Outright Monetary Transactions programme.
US corporate earnings, in turn, will pick up today, with e.g. JPMorgan Chase, Wells Fargo, Citigroup and Intel set to report.
Dutch and German supply
On the supply front, the Netherlands will re-open its 3-year benchmark for EUR 2.5 to 3.5bn. Germany, in turn, will offer its 2023 inflation-linker for EUR 1bn.
Nordea