WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: Most Asian equity indices traded modestly higher on Monday amid expectations that the Chinese government will take measures to boost infrastructure spending. Major European bourses also opened higher, after posting their second weekly gain in a row. In the rates markets, 10yr Portuguese 10y yields stood ca. 12bp lower at 3.075% at the time of writing after DBRS maintained its credit rating and outlook on Friday, while Spanish 10yr yields fell at a two-week low of 1.054% in late Asian trade following Socialist Party leadership’s vote y-day to allow for the formation of a PP minority government. In FX markets, the USD strengthened against its major currency peers, buoyed by hawkish comments from Fed officials. Looking at this week’s calendar, focus is on a number of Fed officials who are scheduled to speak later today, as well as on ECB President Mario Draghi’s speech tomorrow. The main US data releases include CB consumer confidence on Tuesday (Oct), new home sales on Wednesday (Sep), durable goods orders on Thursday (Sep), and Q3 GDP 1st est. as well as UM consumer sentiment on Friday (Oct). In the euro area, PMI indices (Oct) take centre stage today, while ESI (Oct) also lures market attention. The U.K. GDP release for Q3 on Thursday after the Brexit vote is also in focus.
GREECE: The negotiations with official lenders in the context of the 2nd programme review are underway and will reportedly take place in two rounds, the first one lasting until October 3oth and the second extending from November 20th until December 5th when the Eurogroup is scheduled to convene. According to press reports, the sticking points so far have been labour market reform and the amendment of the legal framework for the out-of-court workout. According to the Bank of Greece Balance of Payments data, in August 2016, the current account showed a surplus of €1.8bn down by €379mn YoY, which is attributable to a decline in the surplus of the services balance and to the deterioration in the primary and the secondary income accounts.
SOUTH EASTERN EUROPE
BULGARIA: The positive sentiment towards the local equity market waned further last week amid scarce investor interest and lack of triggers. On the local sovereign debt market, government bonds of medium-term maturity firmed while Eurobonds ended the week little changed.
CYPRUS: Fitch upgraded on Friday the sovereign credit rating of Cyprus by one notch (from B+ to BB-) with a positive outlook.
SERBIA: The EUR/RSD remained little changed last week, hovering around a tight range of 123.00-123.35. In other news, the United Arab Emirates will lend Serbia $1bn to fill the gap in budget deficit.
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