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Norvik Research 24.01.2017

24/01/2017 18:40

Global developments

The ruling by UK’s Supreme Court against the government’s ability to launch Brexit measures without prior parliamentary approval is highly unlikely to block the process while boosting chances for a repeat Scottish independence vote. The sterling slid 0.5% against the dollar after the ruling (that also removed the need for the government to consult devolved assemblies including in Scotland) and is down 0.8% on the day, at 1.244. The dollar index is 0.3% stronger, after yesterday’s 0.7% drop. The Turkish lira has recovered most of the initial losses after the CBT’s decision to hike overnight lending rate by 75 bps while leaving all other rates unchanged. Yields on 10-year UST are up 4 bps at 2.44% today, offsetting yesterday’s increase. S&P 500 futures are little changed after the 0.3% drop yesterday. Nikkei 250 is down 0.6%, China’s CSI 300 is flat. Emerging markets and European stock indices are broadly higher. Gold prices are 0.4% lower.

Oil prices are 0.4% stronger today at $55.3/bbl (Brent), supported by further evidence of output cuts by OPEC exporters. Crude oil inventories are projected to increase by 2.3 mn bbl in the previous week.

Russia and CIS area developments and market colour

Russia’s industrial production data for December were stronger than expected. Output rose 3.2% YoY compared to a Bloomberg consensus forecast of 1.7% YoY, following 2.7% YoY expansion in November. According to Rosstat’s estimates, in seasonally- and work day-adjusted terms, IP in December rose 0.4% MoM after 1.3% in November. The mining and quarrying output rose 2.9% YoY in December after a 2.7% YoY increase in November, led by gas extraction (+4.6% YoY) and oil output (+3.3% YoY). Manufacturing output increased 2.6% YoY, after 2.5% YoY in November. The sharp increase in utilities output (5.5% YoY) was driven by very cold weather. Acceleration in recovery to 1.9% YoY in Q4 took full-year IP growth to 1.1%, likely limiting last year’s decline in real GDP to 0.4%-0.5%, in our view.

The rouble is 0.5% stronger today at 59.2. OFZ yields are 2-4 bps wider today. Russia’s a longer-term sovereign Eurobond yields are flat today. Ukraine and Kazakhstan longer-term sovereign yields are 2-4 bps tighter. Armenia-25 and Belarus-18 are 4 bps and 12 bps wider respectively.

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