Norvik Research 13.01.2017

13/01/2017 19:00

Global developments

The start of the US reporting season was marked by stronger-than-expected results by the country’s several leading financial institutions. S&P 500 futures are marginally higher, after the late recovery in the index yesterday allowed its daily drop to be contained to 0.2%. The EuroStoxx 600 is 0.5% higher today. Nikkei 225 is up 0.8%, CSI 300 is up marginally.

The dollar continued to weaken today as December retail sales data came out below expectations. Excluding gasoline and cars, retail sales were flat last month, versus a consensus for a 0.4% MoM increase. The US dollar index is down 0.2% today after falling 0.3% yesterday. EURUSD is 0.3% higher at 1.065. US 10-year yields are 1 bp lower at 2.35%. Gold prices are 0.1% higher today, near a 2-month high.

China’s foreign trade data for December were worse than expected. The dollar value in exports declined 6.1% YoY against consensus for a 4.0% YoY drop while imports value grew 3.1% compared to the 3.0% forecast.

Oil prices are heading to their first weekly decline in a month, as market focus has shifted to implementation of OPEC’s output cut commitments. Brent prices are 0.5% lower today at $55.8/bbl following yesterday’s 1.7% increase.

Russia and CIS area developments and market colour

Russia’s finance minister Siluanov has estimated that additional budget revenue this year at average oil prices of $50/bbl would total RUB 1tn (1.2% of GDP). Other senior officials suggested that the increase in oil prices should allow the government to avoid exhausting the Reserve Fund already this year. We find these projections very plausible: provided oil prices stay near current levels and borrowing meets targets, most of the remaining RUB 1tn stock of Reserve Fund assets should be preserved, in our view.

The rouble is 0.2% weaker today, in line with oil prices. OFZ yields rallied 12 bps on average yesterday and are little changed today. Russia’s longer-term sovereign Eurobond yields are 1 bp wider, Azerbaijan-24 are 2 bps tighter. Ukraine sovereign bond yields are 1-4 bps tighter.

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