Norvik Research 21.11.2016

21/11/2016 18:46

Global developments

The dollar and US treasury yields declined at the start of the new trading week as oil and other commodities rallied. The dollar index is down 0.4% today, after rising for 10 consecutive trading sessions. EURUSD is up 0.3% at 1.063. Yields on 10-year US treasuries fell 3 bps to 2.32%. S&P is up 0.4% to a fresh all-time high. Asian stock markets rallied: CSI 300 is up 0.7% while Nikkei 225 is up 0.8%. Euro Stoxx 600 is 0.2% higher. The Bloomberg commodity index is 1.6% higher on Friday’s level, led by oil.

China’s onshore yuan dropped to a fresh eight-year low. The currency fell to 6.90 against the dollar today, the weakest level since June 2008, while the offshore rate was close to 6.92. Concerns about risk of a trade-related conflict with Trump’s administration have contributed to the negative sentiment recently.

Oil prices jumped 3% as investors increased bets that the forthcoming OPEC meeting will result in an agreement to cut output. Positive sentiment was supported by comments from Russia’s president Putin in Peru confirming Russia’s readiness to freeze output as part of an OPEC agreement. Baker Hughes rotary rigs count increased by 19 to 471 in the previous week, the sharpest weekly increase this year. Brent prices are up 2.8% at $48.2/bbl.

Russia and CIS area developments and market colour

Russia’s consumer demand indicators for October were considerably weaker than expected. Real retail sales fell 4.4% YoY, after a 3.6% YoY drop in September (market consensus was for a 3.0% YoY decline). In seasonally-adjusted terms, on our estimates, retail sales fell 0.3% MoM after 0.7% MoM increase in September. The only positive growth was recorded by real wages, up 2.0% YoY after 1.9% YoY in September (revised from a 2.8% YoY increase; market consensus: +2.4% YoY). However, real disposable income dropped sharply (-5.9% YoY). Unemployment rose to 5.4% in October from 5.2% in September, in line with seasonal trends. Unlike the production side, the latest demand-side indicators are not indicative of stronger performance in October.

The rouble is 1.5% stronger today at 64.0 against the dollar following oil prices dynamics. OFZ yields tightened marginally at the longer end of the curve, following a very volatile session on Friday. Russia and Kazakhstan longer-term sovereign Eurobond yields are about 1-2 bps tighter today. Ukraine Eurobond yields are 4-9 bps tighter. Azerbaijan-24 and Belarus-18 are 2 and 3 bps tighter respectively.

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