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Market Comment | Markets give Spanish assets a breath of fresh air



  • Calm markets during the week, in which political tension in Spain has been one of the main drivers of market movements although, after the fall the previous week, Spanish assets have recovered slightly. On the other hand, central banks have been another key factor in financial markets, pending the Communist party meeting in China.
  • Spanish political risk continues to take centre stage. The Catalonian president’s fudged intervention (see) has forced the Spanish government to ask for a formal clarification of whether this was indeed a unilateral declaration of independence (see). And depending on the answer (due next Monday), the government will respond accordingly. However, market reaction would appear to indicate that the tension has eased, at least momentarily.
  • Eventful week for monetary policy in the US as most members offered their view on the Fed’s next steps regarding rate hikes in the normalization process. Kaplan (see) said that more inflation signalling is needed before raise rates again, while Evans (see) supports a more gradual increase in policy rates (in December) after an “honest discussion”. The lack of inflation continues to be the main concern of Fed members according to the latest FOMC minutes (released on Thursday), but the Fed is holding onto its course for a December rate hike. (see)
  • The EUR appreciated on hawkish comments from the ECB’s Lautenschlaeger (see), who called for a start on winding down QE. Meanwhile, Peter Praet (see) stuck to his dovish position, maintaining a cautious tone and defending the need for support on the monetary side. European equity indices also showed a positive performance on the back of positive economic data, especially in Germany (see)
  • The TRY fell sharply on tensions between the United States and Turkey, as both sides suspended visa services (see) and on top of this the main Turkish stock index also fell significantly (see). EM currencies fell across the board, despite oil prices rising above $56 per barrel on Saudi Arabia cutting output in November and signs of an oil market rebalancing (see). The MXN in particular due to the NAFTA negotiation process.
  • Chinese assets outperformed this week as FX reserves showed a higher than expected figure despite the disappointing Caixing Services PMI (September) ahead of next week’s Communist party meeting, where the main policies for the next five years will be discussed (see).

BBVA Research suggests the following reading list:

  • World Economic Outlook by the IMF (see)
  • Rethinking Macroeconomic Policy (The Peterson Institute will hold a conference coordinated by Olivier Blanchard and Lawrence H. Summers) (see),
  • Maintaining price stability with unconventional monetary policy measures (Speech by Peter Praet) (see)

Update 15.00 CET 13 October, 2017

Table 1


Source: Bloomberg, Datastream and Haver

* With one day delay


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