EUROPEAN INFLATION: Spain HICP Higher Than Expected; Wider Implications Unclear
Oct-30 08:00
Spanish flash October HICP was firmer consensus on a rounded basis at 3.2% Y/Y (vs 3.0% cons and prior). On a monthly basis, HICP was 0.5% (0.3% cons). Core HICP (excluding energy and unprocessed foods) was estimated softer than before, at 2.6% Y/Y (no consensus, 2.7% prior).
- There are two key takeaways for us here: first that core CPI is higher than expected - but the press release notes that there are "increases in air and rail transport prices." These may be seen across other Eurozone member states - but if these are big drivers may also be reversed next month.
- Second, the uptick was also driven by "higher electricity prices compared to October 2024". This was something flagged in the sellside previews that we had read but may be a larger impact than expected given the even larger upside surprise to headline HICP and headline national CPI. The press release does also note "These increases are partially offset by lower gasoline prices."
- National-level flash CPI was also higher than expected, meanwhile, at 3.1% Y/Y (vs 2.9% cons, 3.0% prior), with core CPI at 2.5% Y/Y (vs 2.4% cons and prior).
- For context, Spain represents 12% of the Eurozone HICP basket in 2025.
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MNI: BAVARIA SEP CPI +0.4% M/M, +2.4% Y/Y
Sep-30 08:00
- MNI: BAVARIA SEP CPI +0.4% M/M, +2.4% Y/Y
MNI: GERMANY SEP UE RATE (SA) 6.3% (FCST 6.3%); AUG 6.3 %
Sep-30 07:55
- MNI: GERMANY SEP UE RATE (SA) 6.3% (FCST 6.3%); AUG 6.3 %
- GERMANY SEP UE NET CHANGE (SA) +14K; AUG -7K
- GERMANY SEP UE TOTAL (SA) 2.976 MN; AUG 2.962 MN
GILTS: Off Highs, Consolidating Yesterday's Rally
Sep-30 07:53
Gilts look to global peers for cues, with U.S. government shutdown risk and softer-than-expected French CPI providing an early bid, before a pullback from highs as some resistance levels in wider core global FI markets hold.
- Gilts futures flat at ~90.90 with bulls unable to force a test of first resistance at the Sep 24 high (91.28). That leaves bears in technical control, with first support located at the Sep 26 low (90.26).
- Yields essentially unchanged across the curve, with 2s10s and 5s30s remaining in their steepening trend despite the recent flattening moves.
- Local fiscal risks remain evident, with focus on the November Budget.
- We have outlined Chancellor Reeves’ fiscal options if she chooses to break the government’s election pledges.
- GBP STIRs also little changed on the day, showing less than 5bp of easing through year end.
- We continue to suggest that the market is underpricing the odds of a cut in Q4, but note that such a move would likely require support from Governor Bailey, as well as Deputy Governor’s Ramsden & Breeden (in addition to dovish dissenters Dhingra & Taylor).
- Ramsden maintained his position as the most dovish MPC member that did not vote for a cut in September via his speech yesterday, with Breeden set to speak today. We will also hear from BoE’s Lombardelli & Mann today.
- No reaction to modest revisions in the final update to UK Q2 GDP data.
