Softer than Expected Chinese GDP Weighs on Riskier Assets

European equity markets are trading under pressure as Asian markets were mixed. Wall Street closed at record highs but a slight slow down in Chinese GDP growth to 6.8% from 6.9% was enough to knock back Hang Seng and CSI 300. By contrast strong trade data out of Japan helped to underpin the Nikkei. Bank of Korea meanwhile kept policy on hold, but for the first time in a year, there was no dissenter in favor of a rate hike. Oil prices little changed around the USD 52 per barrel mark.

The odds for a hard exit from the EU appears to be increasing. The Guardian newspaper reports that EU leaders will refuse to widen talks and stick to their insistence for the British government to make greater concessions with regard the financial divorce settlement, although, aware of her fragile political standing in Westminster, plan to at least try to soften the blow by publicly praising her efforts. Meanwhile, a group of hardline Brexiteers in the ruling Tory party have written to PM May exacting that the government should walk away from negotiations if the EU continues to refuse to talk about trade. The EU has been refusing to open discussions on trade and transition until divorcing terms are settled, something which angers Brexiteers as it breaks a cardinal rule of negotiation, that putting everything in the negotiating pot at the same time would increase the scope for compromises to be made.

UK Retail Sales Were Softer than Expected

UK retail sales for September underwhelmed, contracting by 0.8% month over month, well off the median forecast for a modest 0.1% decline. The August figure was revised down to 0.9% month over month growth from 1.0%. The year over year comparison came in with 1.2% growth after 2.3% year over year in August, and was much weaker than the median forecast for 2.1%. Core sales, ex-fuel, showed similar weakness, declining 0.7% month over month versus the median for -0.2%. Higher price pressures are pinching consumers spending power, with prices up 3.3% year over year, the highest acceleration since March 2012, driving a widening gap between the quantity bought and the amount spent.

Spain to move to take control in Catalonia and suspend Catalonia’s autonomy, which also suspends the power of the Catalan government, after Regional President Puigdemont refused the claim to independence, saying that independence is merely suspended to allow talks with Madrid. The central government in Madrid then declared that it “will continue with the procedures set out in Article 155 of the Constitution to restore the legality of self-rule in Catalonia”.