Most attention this week will remain on Europe: the Eurogroup meeting on Monday and the subsequent Ecofin meeting on Tuesday. Markets will closely eye the meetings looking for information on whether Spain will need a bailout and what will be the conditions attached to such support. We expect Spain to ask for bailout only later this month, before the large debt redemptions due in last week of October. As for now, the reluctance of Spain to request a formal bailout will, in our opinion, continue to be a negative factor for the markets.
Apart from Spain, the negotiations between Greece and the Troika will also likely be discussed at the Eurogroup and Ecofin meetings this week. According to press reports, the negotiations are slowed down by differences of opinion between the EU and the IMF over the specific measures to be taken to address the country's debt problems.
Investors will also watch the third-quarter earnings season in the U.S. scheduled to kick off on Tuesday evening with Alcoa. More interesting will be the big banks’ earnings reports due Friday: J.P. Morgan and Wells Fargo. Both are expected to show strong increases in profits, which might support equity market sentiment at the end of the week.
Macro data releases this week will be of secondary importance and the economic release calendar is fairly light. Key prints in the eurozone this week will be the industrial production and inflation data. On the U.S. macro data front, key will be the preliminary Michigan confidence index for October due Friday, in the spotlight after the jobs report last week showed continued U.S. recovery.
The key event of the week in Poland will be the second expose by Polish PM Donald Tusk due most probably Friday. Faced with Polish economy losing momentum Polish PM is scheduled to announce a plan showing how his government will respond to the slowdown. The PM might also give some indication of whether the earlier planned significant fiscal tightening is to be scaled back somewhat taking into account the deteriorating economic outlook. That said any further overhaul of the Polish pension system (OFE) is in our opinion unlikely at this point.