Norvik Research 22.02.2017

22/02/2017 19:05

Global developments

Bond prices rallied and the euro touched a six-week low as uncertainty about Europe’s political outlook persisted. EURUSD is down 0.2% at 1.051, the fourth consecutive daily drop. 10-year German Bunds yields are down 8 bps today to 0.245%, the lowest level since early January. France 10-year OAT yields tightened 3 bps to 1.07%. 10-year US Treasury yields are 3 bps lower at 2.40% ahead of today’s release of FOMC minutes. The dollar index is 0.3% stronger today. EuroStoxx 600 is down 0.3%, S&P 500 futures are down 0.1%, after rising 0.6% yesterday. Gold prices are 0.2% higher. Iron ore prices fell 0.5% after surging more than 3% yesterday.

Oil prices declined amid doubts about OPEC’s ability to agree supply cuts for H2 2017 and projections for further increases in US inventories. US crude stocks have likely risen by 3.5mn bbl in the previous week, according to a Bloomberg poll. Oil prices are 1.0% lower (Brent) at $56.1/bbl.

Russia and CIS area developments and market colour

Russia’s consumer demand indicators for January were significantly stronger than expected. Real disposable income leaped 8.1% YoY after falling 6.4% YoY in December (revised from a drop of 6.1% YoY). This surge was due mainly to a one-off payment of RUB 5,000 ($83) to each pensioner last month. Real retail sales fell 2.3% YoY in January, after a 5.9% YoY drop in December (consensus was for a 5.1% YoY decline). In seasonally-adjusted terms, on our estimates, retail sales rose 1.3% MoM after a 0.5% MoM decline in December. Real wages rose 3.1% YoY after 2.8% YoY in December (revised higher from a 2.4% YoY increase); consensus: +2.0% YoY. This rebound in consumer demand indicators may be viewed by the CBR as yet another reason not to rush with a rate cut next month.

The rouble is 1.2% weaker today at 58.1 versus USD, tracking oil prices. OFZ yields are little changed today after widening yesterday afternoon on the larger than expected announced auction volumes. Russia’s and Kazakhstan’s sovereign bond yields are marginally wider today. Ukraine-19 is some 20 bps tighter at 7.25% following fresh comments by government officials about progress of IMF talks, longer-term yields are 1-2 bps tighter.

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