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Norvik Research 31.01.2017

31/01/2017 17:42

Global developments

The latest Eurozone growth and headline inflation data were higher than expected, supporting the region’s equity markets and boosting government bond yields. The area’s Q4 GDP growth picked up to 1.8% YoY compared to consensus and Q3 outturn of 1.7% YoY. Eurozone headline CPI estimate for January was 1.8% YoY versus consensus forecast of 1.5% YoY and the previous reading of 1.1% YoY (core CPI was unchanged at 0.9% YoY). The region’s government bond yields spiked again this morning, with Bund yields topping 0.48%, after declining to 0.45% late yesterday. French 10-year bond yields approached 1.09% this morning, before easing to 1.07%, the highest level since Q3 2015. The euro rose 0.5% against the dollar, to 1.075. Stock markets in Europe are up 0.2-0.5% today. S&P 500 futures are down 0.2% today after declining 0.6% yesterday. Nikkei 225 is down 1.7% after BoJ left policy rates unchanged warning of downside risks to its revised forecasts. Brent oil prices are 0.3% lower at $55.3/bbl

Russia and CIS area developments and market colour

Russia’s real GDP fell 0.5% MoM SA in December and was down 1% YoY, according to MinEcon estimates. The weak performance (compared to growth of 0.1% MoM SA and 0.9% YoY in November) led to a revision in the full-year 2016 real GDP growth estimate to -0.6% YoY, from -0.5%. In Q4 GDP is now estimated to have declined 0.1% QoQ SA and 0.3% YoY.

Ukraine’s current account weakened sharply in Q4, due mainly to a surge in import values. The NBU data, out last night, show Q4 deficit widening to $656mn, from $317mn in Q4 2016. On the 12-month rolling basis, c/a deficit rose to $3.4bn (3.8% of GDP), from $3.0bn (3.4%) in Q3. The dollar value of goods imports rose 16.9% YoY in Q4, from 8.9% YoY in Q3, while exports rose 7.9% in Q4 compared to a 5.6% YoY drop in Q3.

The rouble is little changed today at 60.0 against the dollar. OFZ yields are higher in the middle part of the curve on published auction details, after widening by up to 7 bps yesterday. Kazakhstan’s Eurobond prices are recovering towards yesterday opening levels, as the president’s economic policy address today contained few surprises. Ukraine’s sovereign yields are some 5 bps wider as security situation in the East continues to deteriorate.

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