Norvik Research 18.01.2017

18/01/2017 18:50

Global developments

Yesterday’s sharp movements in FX space were partly reversed today, ahead of US CPI data and tonight’s speech by the Fed Chair Yellen. The US dollar index is up 0.3% today after a 1% drop yesterday. The pound sterling is 0.5% weaker against the euro, after yesterday’s 2% surge. US CPI for December came out at 2.1% YoY, in line with consensus. The US 10-year yields are up 3 bps to 2.36%. Safe haven assets are down for the first time in more than a week with the yen losing 0.6% and gold price down 0.3%. Equity markets are mixed. S&P futures are flat, EuroStoxx 600 is 0.2% lower. Asian stocks are higher with both Nikkei 225 and CSI 300 up 0.4%.

Oil prices are falling after the head of the International Energy Agency projected a “strong” reaction in US shale oil output to higher prices. Brent is 2.1% lower at $54.3/bbl after falling 0.7% yesterday.

Russia and CIS area developments and market colour

Russia’s current account surplus in Q4 2016 was slightly higher than market expectations. Yesterday’s preliminary estimate from the CBR shows the Q4 surplus at $7.8bn, compared to a $7.4bn consensus according to Bloomberg. On a 4-quarter rolling basis, the surplus narrowed to $22.2bn (1.7% of GDP) in Q4, from $29.0bn (2.3% of GDP) in Q3 2016. The pace of declines in USD values of exports moderated to 16.3% YoY in Q4, from 23.2% in Q3, while import values declined by 5.6% YoY in Q4, after falling 15.6% YoY in Q3. The services balance deficit narrowed to $6.1bn in Q4 2016, from $6.9bn in Q4 2015 (travel-related spending declined to $5.3bn, from $5.9bn a year ago). At the same time, net private capital outflows declined to $15.4bn on the 4-quarter basis from $19.4bn in Q3 (adjusted for CBR’s operations with liquidity). Russia’s external position will strengthen in Q1 2017 thanks to higher oil prices and hydrocarbon export volumes but stabilizing investment demand should lead to a recovery in imports this year.
Russia’s inflation in the week to 16 January slowed to 0.1% wow (5.3% YoY).

The rouble is 0.2% stronger against the dollar at 59.4 despite lower oil prices. The OFZ curve continued to steepen, with yields on longer-dated paper up to 5bps wider. Auction for RUB 23bn of August 2021 OFZs was 2x covered, issue placed at an average yield of 7.90% without a premium to the market. Russia’s and Kazakhstan’s longer-term sovereign Eurobond yields are 1-2 bps wider. Ukraine sovereign bond yields are 1-3 higher.

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