Norvik Research 08.09.2017

08/09/2017 19:21

Global developments

ECB left interest rate unchanged and hinted on taking decisions with regards to quantitative easing program in October. Draghi expressed concern regarding the recent euro appreciation, however, he neither offered mechanisms to control euro nor commented on expected currency developments. Draghi noted that the growth is robust while inflation is below projections. Draghi said that decisions about QE will be probably made in October. The decisions are to be difficult as the stronger euro restrains inflation. EURUSD gained 1.0% yesterday and is up above 1.20 today. The dollar index was down 0.6% yesterday and is 0.5% lower today to the lowest level since the start of 2015. The dollar weakness is caused by falling chances that Fed will rise interest rates before the end of the year and by approaching hurricane Irma in Florida. US 10Y yields are flat at 2.20%. Futures on S&P 500 are 0.2%. Eurostoxx 600 is marginally up today. Nikkei 225 is up 0.6%. Bloomberg commodity index is 0.4% lower. Gold is marginally up.

Oil prices are up despite unfavourable inventories data. Crude oil inventories increased by 4.6 mn bbl in the previous week for the fist time in the last two months. Brent prices are up 0.4% today at $54.7/bbl.

Russia and CIS area developments and market colour

Nabiullina stated yesterday that CBR will consider cutting rates by 25 or 50 bps at its meeting on 15 September.

The rouble is down 0.2% against the dollar at 59.2. OFZ yields are 1-2 bps lower. Russia’s and Kazakhstan’s longer term sovereign yields are 3-4 bp lower today.

Weekly inflation in Russia came out at -0.1% after -0.2% in the previous week. Annual inflation declined from 3.3% YoY to 3.2% YoY in our estimates. The recent inflation developments are consistent with 50 bps rate cut given the rouble’s further robustness.

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