After a week-long rally, the dollar weakened today, ahead of Janet Yellen’s testimony at 15.00 GMT. Bonds rose globally earlier after Bank of Japan said it will be prepared to buy unlimited amounts of debt at fixed yields. The BoJ’s move halted selloff of Japanese government bonds. Yields on 10-year Japan government bonds declined 2 bps to 0.01% after rising 8 bps after Trump’s victory. Yields on 10-year US treasuries are down 1 bps today to 2.23%. The dollar index is down 0.2%. The pound gained 0.3% against the dollar to 1.248 as retail sales in October accelerated 7.4% YoY (against consensus of 5.3% YoY). S&P futures and both Asian and European stock markets are little changed.
ECB’s Ex. Board member Mersch said today that the ECB’s bond-buying program should be withdrawn “as soon as possible”. ECB will decide on 8 December whether to extend this EUR 1.7tn program beyond end-March. Today’s minutes of the ECB meeting on 19-20 October says that “core inflation still lacks convincing upward trend”. EURUSD is 0.3% stronger today at 1.072.
Oil prices are up on further evidence of cooperation between OPEC and Russia. Representatives of the two sides will start a number of meetings on output curbs today in Doha. US oil inventories rose 5.3 mn bbl (above projected 3.5 mn bbl). Brent prices are up 1.4% at $47.3/bbl.
Russia and CIS area developments and market colour
Russia’s industrial production data for October came out stronger than expected. IP in October fell 0.2% YoY compared to consensus forecast for a 0.4% decline and a.0.8% YoY drop in September. According to Rosstat’s estimates, in seasonally- and work day-adjusted terms, IP in October rose 0.3% MoM after 0.3% contraction in September. The mining and quarrying output rose 0.8% YoY in October after a 2.1% YoY increase in September, led by nonmetallic construction materials (+5.0% YoY), gas extraction (+4.5% YoY) and oil output (+2.4% YoY). Manufacturing output declined 0.8% YoY, after falling 1.6% YoY in September. The recovery in officially-measured output was consistent with the recent PMI data indicating a recovery in manufacturing.
The pace of inflation in Russia stayed at 0.1% in the week to 14 November. We estimate that in annual terms inflation was unchanged at 5.9% YoY.
The rouble is 0.2% stronger today at 64.6 against the dollar. OFZ yields tightened by 4-10 bps today. Russia and Kazakhstan longer-term sovereign Eurobond yields are about 5-8 and 6-10 bps tighter today, respectively. Ukraine Eurobond yields are 10-20 bps tighter. Azerbaijan-24 and Belarus-18 are 6 and 11 bps tighter.
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