Norvik Research 11.01.2017

11/01/2017 18:51

Global developments

The dollar index is higher ahead of today’s media appearance of president-elect Trump. The press-conference, the first by Trump since last summer, is expected to begin at 16.00 GMT. The dollar index is 0.4% higher today. US 10-year yields are little changes at 2.37%. S&P 500 futures are marginally lower. Euro Stoxx is 0.2% higher, while Nikkei 225 is up 0.3% and China’s CSI 300 is 0.7% lower. GBUSD paired its yesterday’s gains and is back at 1.213. Gold prices are slightly higher. Iron ore prices rose a further 3% after a 5% jump yesterday. Bloomberg commodity index is up 0.1% after yesterday’s 0.6% increase.

Oil prices are higher today, supported by reports that Saudi Arabia has reduced crude deliveries to Asia. Brent prices are up 0.8% at $54.1/bbl today, still 5.3% below last week’s close. According to API’s estimates, crude oil inventories in the US increased by 1.5 mn bbl in the previous week.

Russia and CIS area developments and market colour

Russia’s inflation for December has been confirmed at 5.4% YoY, in line with an early estimate. This outturn, compared to 5.8% in November, was below the initial median market expectation, of 5.6%. Officially measured core inflation fell to 6.0% YoY from 6.2% in November. Food price inflation fell to 4.6% YoY from 5.2% while non-food goods inflation fell to 6.5% from 6.7%. Confirmation of the favourable inflation print for December may on the margin make the central bank more inclined to focus on competitiveness of the exchange rate (and therefore consider FX interventions against the rouble soon) rather than the need to achieve further declines in inflation fast.

Russia’s first weekly inflation observation this year was in line with last year’s outcome, of 0.3% over 1-9 January. On our estimates, inflation was 5.4% as of 9 January, unchanged from end-December.

The rouble is 0.3% weaker today, despite the recovery in oil prices. OFZ yields are 2-5 bps lower today after tightening 5-7bps yesterday. Russia’s longer-term sovereign Eurobond yields are 3-4bps wider today. Belarus-18 and Azerbaijan-24 are broadly flat. Ukraine sovereign bond yields are 2-4 bps wider today while Ukraine-19 is 9 bps wider at 7.29%.

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