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Norvik Research 16.12.2016

16/12/2016 17:38

Global developments

The dollar is weaker today, after fresh strong increases in the aftermath of Fed’s decision. The US dollar index is 0.1% lower, having risen 0.6% yesterday and 1.3% on Wednesday. EURUSD recovered to 1.045 today, after touching 1.037 yesterday, the minimum since January 2003. 10-year US Treasury yields increased 3 bps yesterday to 2.60% and are 2 bps lower today at 2.57%. S&P 500 futures are 0.1% higher after the index added 0.4% yesterday. All of Euro Stoxx 600, Nikkei 225 and CSI 300 are 0.2% higher today. Gold prices have recouped half of yesterday’s 1.3% losses.

Oil prices are little changed today. Libya has reopened one of its main oil fields and is lining up the first shipment in two years from its largest export terminal. Brent price are 0.7% higher today at $54.4/bbl.

Russia and CIS area developments and market colour

Russia’s central bank left the key unchanged at 10.0%, in line with expectations, and signaled continuing cautious stance. According to the press statement, inflation and economic activity have been broadly in line with CBR’s forecasts. Inflation fell to 5.6% YoY as of 12 December from 6.1% in October due to the effect of higher oil prices, weak consumer demand and good crops restraining food inflation. Economic activity stopped falling in QoQ terms in Q3 and will likely grow moderately in 2017, according to CBR’s forecasts and estimates. The CBR Governor Nabiullina observed during the press conference that a cut in policy rate in Q2 2017 looks more likely than Q1 2017, reflecting the regulator’s reluctance to change its oil price assumptions.

Russia’s industrial production data for November came out stronger than expected. IP in November increased 2.7% YoY compared to consensus forecast for a 0.3% rise and a 0.2% YoY drop in October. According to Rosstat’s estimates, in seasonally- and work day-adjusted terms, IP in November rose 0.5% MoM after 0.6% growth in October. The mining and quarrying output rose 2.7% YoY in November after a 0.8% YoY increase in October, led by gas extraction (+2.6% YoY) and oil output (+3.2% YoY). Manufacturing output increased 2.5% YoY, after falling 0.8% YoY in October. The recovery in officially-measured output was consistent with the recent PMI data indicating a recovery in manufacturing.

The rouble is 0.4% stronger today at 61.6 against the dollar. OFZ yields are 2-8 bps tighter today. Russia and Kazakhstan longer-term sovereign Eurobond yields are 1-2 bps tighter. Azerbaijan-24 and Armenia-25 yields are 2 and 5 bps lower respectively, while Ukraine sovereign bonds are 2-3 bps wider.

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