Friday October 6, 2017 - 15:06:01 GMT
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Catalonia Simmers While U.S. Economic Picture Improves
John M. Bland, MBA
”Unlawful “ Catalonia Independence Wins Big Last Sunday voters in the Catalonia region of Spain apparently overwhelmingly vote in favor of independence from Madrid. On Thursday, Spanish Economy Minister Luis de Guindos ruled out mediated talks with separatist leaders . He said independence is out of the question and that Spain has nothing to discuss with the secessionists until the rule of law is restored. Clearly, Madrid is taking a hard line on the vote by questioning its very legitimacy. There are press reports that Prime Minister Mariano Rajoy and his minority government have been seeking cross-party political support for his hard-line approach to the secessionists. They say his next move could involve suspending the regional government and implementing direct rule from Madrid.
The regional government in Barcelona must soon announce the results of its succession vote. When it does a 48-hour clock will start ticking on when the regional Parliament must trigger the process for leaving Spain. Its easy to vote for independence from a central government. Its another thing to make a new nation a reality.
This event could have implications beyond the Spanish borders as it follows on the heels of the U.K. exit from the EU. Many EU member states have regions seeking autonomy from their central governments. Waiting in the wings is the Five Star movement in Italy. How Madrid handles this challenge to its authority has implications for the future of the EU experiment as a whole and the EUR. It is hard to see how this can end well. Keep an eye on Spanish bond yields and stock prices as leading indicators of investor confidence. They might also be your best barometer of it whether it is likely to spill over into the Euro.
Poor Headline U.S. Payroll Data Dismissed As expected, the September U.S. Non Farm Payroll data were weak in the wake of Hurricanes Harvey (Texas) and Irma (Florida). Payrolls fell by -33k in the month. Street estimates had been for a rise of only 90K or so and the data were much weaker than that. Nevertheless, a weak payroll figure was expected and the markets knew that street estimates would be hard to make, so the decline was viewed as one-off. A significant rebound is expected is as early as in October or November. Instead, markets took note of two other strong indicators. The unemployment rate fell to 4.2% from 4.4% in August. This was a sixteen year low. More importantly monthly Average Hourly Earnings gained 0.5%, much higher than expected. This resulted in a yr/yr increase of 2.9%. Some say that storm effects might have distorted the data to the upside while others said the data reflected and underlying improvement. Markets felt the Earnings data would lock in a +25bo Fed rate hike in December.
Amazing Trader EVENT RISK Calendar:
Mon 9 Oct
JP, CA, U.S.- Holiday
Tue 10 Oct
08:30 GB- Output and Trade
Wed 11 Oct
12:30 US- PPI
12:30 US- Weekly Jobless
14:30 US- EIA Crude
Fri 13 Oct
12:30 US- Retail Sales
12:30 US- CPI
14:00 US- prelim University of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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