SPAIN DATA: Services PMI Downside From External Sector; Rather Bright Elsewhere

Gilt futures tick lower at the open, mimicking moves in their German peer, before stabilising.

• Contract +3 at 93.65.
• Initial support and resistance located at 93.15 & 93.96, with the technical trend structure remaining bullish.
• Yields essentially unchanged across the curve, 3-5bp off October lows.
• UK headline flow remains focused on potential fiscal tightening measures that are set to be delivered at this month’s Budget: See recent bullet (UK FISCAL: Weekend media updates on the Budget) for more on the latest headlines.
• GBP STIRs trade around pre-gilt open levels, little changed on the day (greater details in our early STIR bullet: STIR: 7bp Of Easing Priced For Thursday's BoE, We View Decision As 50/50 )
• The bulk of the dovish move that followed the latest CPI release has held, after Dec ’25 MPC pricing hit the most dovish level seen since early August
• We would categorise our own view of this week’s BoE meeting as 50/50 between a 25bp cut and a hold. If it wasn't for the upcoming Budget we would have more certainty that a cut would be delivered given the downside surprises to inflation (particularly as this was driven by food) and the downside surprise to wage growth
• Final UK manufacturing PMI data and a GBP550mln sale from the long bucket of the BoE’s APF portfolio are due today.

The Spanish manufacturing PMI remains comfortably in expansionary territory. October’s report signalled solid domestic demand, though export new orders declined at the fastest pace in 5 months. Softness in export orders signals a continuation of the trend seen in Q3. According to the flash national accounts release last week, goods exports fell 1.3% Q/Q. 

• SPAIN OCT MANUF PMI 52.1 (51.9 FCAST, 51.5 SEP)

Key notes from the release:

•  “Firmer demand was predominately domestic led as new export orders declined at the fastest pace for five months. There were several reports of weak demand from neighbouring France”.
• “Firms in many instances chose to not replace leavers or renew expiring temporary staff contracts. The net result was a second successive monthly fall in overall manufacturing sector employment”.
• “A fractional decline in input costs was recorded in October”…“ In some instances, lower costs were passed on to clients via a reduction in selling prices. This meant that overall manufacturing output prices declined for a second successive month, albeit only marginally. Some firms reported reducing selling prices to stimulate sales”.
• “Confidence in the outlook improved since September amid hopes of a general improvement in demand and higher sales”.

• MNI: SPAIN OCT MANUF PMI 52.1 (51.9 FCAST, 51.5 SEP)