Spain: Stronger PMI reading amongst political chaos - BBH

Analysts at BBH note that Spain's PMI readings were stronger than expected, and the composite snapped a two-month decline that had seen it weaken in August to its lowest level since January.  

Key Quotes

“The events in Catalonia, which accounts for about a fifth of Spain's GDP, may be picked up in next month's report.  Of course, since the weekend's events, everyone is urging both sides to de-escalate, but the Catalonians seem set to declare independencewithin 48 hours.  The EU cannot mediate because it would give legitimacy to every region in Europe that wants to secede from the national state.”  

“Indeed, the EU cannot mediate because the Catalonian claim is unconstitutional, as ruled by the country's top court.  The Catalonian leader Puigdemont claimed that vote earned it the right to declare independence.  But the vote and the funding for it violates Spanish laws, and over 40% of the eligible voters did not vote.  Spanish assets are continuing to underperform.  The 10-year yield is up four bp compared with 2.5 bp in Italy.  Most other countries are seeing lower yields.  Spanish shares are off 2% today, led by a 3% loss in financials.  Stocks were flat yesterday after falling 1.2% on Monday.  The rating agency DBRS is set to announce the results of its review of Spain's credit and comment on the recent political events ahead of the weekend.”