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Daily Agenda: With New Data Reports, Abenomics Hits More Bumps

Production slips in Japan. Catalan vote challenged by Madrid. Walgreens to announce quarterly earnings.

Economic data from Europe released today is upping the ante on the European Central Bank to act. Euro zone consumer inflation for September registered lower than forecast with the headline index at an annualized 0.3 percent. Core inflation (less food and energy) measured at 0.7 percent, a contraction from the reading in August. Italian-specific consumer price index and (CPI) and producer price index (PPI), also released today, saw the country hit deflationary levels on a year-over-year basis, with prices at the cash register 0.1 percent lower than the same month in 2013 and 1.7 percent lower at the factory gate. With price growth well below central bank targets, ECB president Mario Draghi faces a challenge to take further action to jump start growth measures and avoid stagflation in advance of Thursday’s rate announcement.

Abenomics faces more challenges. Japanese industrial production declined 1.5 percent in August compared to July, increasing the risk that the Japanese economy might slip into recession. Retail sales data for the month and the employment rate, also released today, improved for the month. But the political pressure on the administration of Prime Minister Shinzo Abe to delay a second consumption tax hike in 2015 is increasing. Yesterday the yen was trading at 109.30 to the dollar, the weakest the currency has been against the greenback since 2008.

PMI declines in China. The HSBC final manufacturing PMI index announcement for September registered at 50.2, lower than the initial reading and analyst forecasts. With a clear trend in recent months toward slowing growth, many economists have begun to discuss the likelihood that Beijing will lower projections for gross domestic product as the fourth quarter begins.

Catalan independence referendum suspended.Spain’s Constitutional Court ruled today that an announced referendum on independence for Catalonia cannot proceed until a ruling is provided by the court. In response, Artur Mas, the president of the Spanish autonomous region of Catalonia, has pledged to move ahead with plans for a vote on November 9.

U.S. consumer confidence index levels on deck. Conference Board consumer confidence index levels for September are scheduled for release this morning U.S. Eastern time, with consensus forecasts for a marginal uptick to 92.5. S&P/Case-Shiller Home Price Index levels for July will also be announced, with expectations for a rebound from a month-over-month contraction in the headline 20-city index in June. The pace of home price expansion has been softening for months with especially notable weakness in cities including Atlanta and Detroit.

Walgreens quarterly earnings announced today. Suburban Chicago–headquartered pharmacy chain Walgreens will report fiscal fourth quarter results today. Analysts expect further expansion in topline revenues in today’s announcement with continued pressure on margins as the company struggles to cut internal costs. The firm’s stock closed yesterday at $59.60, more than 20 percent below levels prior to the announcement in June of the U.S. retailer’s acquisition of U.K. drugstore chain Alliance Boots.

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