Spain remains the only bright spot

The contrast between Italy's and Spain's PMI prints for October earlier shows that not all periphery nations in the Euro area are alike. While Spain's economy looks to be on a recovery path, Italy's economy looks to be headed for a major setback.

For October, all three of Italy's PMI prints (manufacturing, services, composite) has entered into contraction territory and that won't be music to the ECB's ears. The good news is that the last time these sectors saw a contraction, it immediately recovered. However, you get the feeling that this time around is a little different.

Fear is an important element in the psychology of trading. And although Spain's figures are holding up well as of late, Italy's dismal showing will breed fear in the minds of traders as the overall Eurozone growth momentum remains sluggish. The fear is that Italy's downturn will spark a domino effect in the rest of the region.

Despite some improvement on the German and Eurozone final prints relative to initial estimates, those readings are still weaker compared to that of September. All that means is that things are less pessimistic but they are still pessimistic with regards to the Eurozone growth recovery.

I don't like to harp too much on PMI prints as they are just survey data, but so far they have been a good precursor of things to come in terms of hard data in the Eurozone. And if the trend continues, this will begin to throw a wrench in the ECB's plans to normalise monetary policy next year.

And that's a real risk that euro bulls will have to consider in the months ahead. My take is that the ECB wants to get QE out of the way for now and maintain that confident facade, brushing aside the sluggish growth as temporary. But come next year, if this persists, I wouldn't rule out Draghi shifting to a more dovish tone.