Norvik Research 10.02.2017

10/02/2017 17:41

Global developments

Risk appetite has been supported by Trump’s promise of a major US tax reform package over the next 2-3 weeks and a constructive outcome of the first conversation with his Chinese counterpart. 10-year US Treasury yields are up 2 bps at 2.41%, German 10-year yields are 2 bps higher from yesterday’s close at 0.33%. The dollar index is up 0.2% today after rising 0.4% yesterday. The pound sterling is down 0.4% against the dollar at 1.245 despite the stronger than expected industrial output, manufacturing and construction output data for December. S&P 500 futures are up 0.1% after gaining 0.6% yesterday. Iron ore prices jumped 3.5% today gaining about 9.5% since the start of the weak. Gold prices are down 0.3% while Bloomberg commodity index is 0.2% stronger.

China’s trade data for January point to a recovery in both domestic and external demand. Exports grew by 7.9% YoY in dollar terms against consensus of 3.2% YoY growth while imports jumped by 16.7% YoY against consensus of 10.0% YoY. Trade balance in January totalled $51.4bn, up from $40.8bn in December. Market sentiment has also been buoyed by the fact that Trump has reiterated the US government’s commitment to the “One-China” policy in his reportedly constructive discussion with President Xi. Asian equity markets are considerably stronger today, with China’s CSI 300 up 0.5% and Nikkei 225 jumping 2.5%.

Oil prices jumped today after the IEA report that OPEC producers have implemented over 90% of the agreed output cuts, the highest on record. Saudi Arabia, alongside with Qatar and Angola have reduced output in excess of their commitments. The IEA also further increased its estimates for world oil demand both for 2016 and 2017. Brent prices soared 1.4% on the publication of the IEA report and are currently 2% up on the day at $56.7/bbl.

Russia and CIS area developments and market colour

The rouble is 0.5% stronger today at 58.6 against the dollar. OFZ yields are 1-3 bps tighter today, following a similar daily change yesterday. Russia’s and Kazakhstan’s longer term sovereign bonds yields are without significant changes. Ukraine sovereign yields are 7-15 bps tighter. Azerbaijan-24 and Belarus-18 are 2 and 12 bps tighter, respectively.

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