POWER: Italy January Power Tracks 1% Weekly Decline

SFIH6 96.45/96.55/96.65/96.75c condor vs 96.25p, bought the condor for 0.25 in 2k.

Gilts edge higher at the open, taking cues from core global FI markets overnight.

• Note that a recovery from overnight lows in equity benchmarks has pushed both TY & Bund futures away from Asia-Pac eyes.
• Gilt futures little changed at 93.62.
• The bullish technical trend remains intact. Initial support and resistance located at 93.15 & 93.98.
• Yields ~1bp lower in a parallel shift across the curve.
• October lows continue to provide initial yield support levels, with only 30s piercing last month’s base yesterday.
• Final services PMI data is due today, but the bulk of the focus remains split between tomorrow’s BoE decision and local fiscal matters.
• On the former, we have characterised our view as 50/50 (when it comes to a cut or a hold), which is more dovish than current market pricing (~7bp of easing).
• We would have more confidence in a cut if the Budget was not coming into view, particularly given the soft food CPI reading in the latest monthly inflation release.
• Our full preview of the decision will be published later today.
• Elsewhere, the NIESR has suggested that the Budget should include GBP50bln of fiscal consolidation, with the aim of building fiscal headroom of ~1.5% of GDP.

Spanish domestic demand remains solid according to the October PMI round, with today’s stronger-than-expected services reading building on the signals from Monday’s manufacturing print. The services and composite readings reached year-to-date highs in October 

• MNI: SPAIN OCT SERV PMI 56.6 (54.5 FCAST, 54.3 SEP)
• MNI: SPAIN OCT COMP PMI 56.0 (54.3 FCAST, 53.8 SEP)

Key notes from the release:

• “Panellists linked growth of activity to a mixture of commercial actions, work on existing contracts and increased levels of incoming new work”
• “New business gains were principally driven by domestic clients as new export work rose only slightly. There were reports of an uncertain international environment weighing on foreign demand.”
• “Higher new work encouraged firms to take on additional workers, with employment reported to have risen again during October in line with a trend that stretches back over three years”
• “Panellists are forecasting an uplift in demand and are planning to expand their commercial activities. Overall, sentiment rose to its highest level since March”
• “Input cost inflation dropped to a three-month low”….“ In response to higher input costs, firms sought to protect their operating margins in October by increasing their own selling prices.”