The lack of additional monetary stimulus has disappointed investors. While the ECB’s decision to keep all rates unchanged was in line with expectations, President Draghi’s disclosure that an extension of the asset-purchases plan was not discussed has led to selling pressures on stocks and longer-dated bonds. The US 10y yields added 6 bps to 1.66% today, after a 6 bps increase yesterday. The dollar index is up 0.4% today, yesterday’s spike in EURUSD proved short-lived, with the euro trading at 1.121 today. Euro Stoxx 600 is down 0.7%. China’s PPI for August came out at -0.8% YoY (versus consensus for - 0.9% YoY). China’s CSI 300 declined 0.6%, Nikkei 225 is flat.
Oil prices corrected lower today after yesterday’s spike. The EIA reported US crude oil stocks down 14.5 mn bbl in the previous week (the biggest such drop since 1999, likely driven by adverse weather). Brent prices jumped 3% on the news yesterday, briefly rising through $50/bbl, but eased 1.4% today to $49.0/bbl.
Russia and CIS area developments and market colour
A court in London will reportedly review Russia’s claim against Ukraine regarding the missed $3 bn Eurobond payment on 17-20 January 2017. This in line with earlier statements by Russian officials (the Russian side was seeking an accelerated review schedule for this case). The case is a key concern for Ukraine’s creditors and an obstacle to its return to capital markets.
Ukraine’s inflation rose to 8.4% YoY in August from 7.9% in July. The increase was caused by the low base: prices fell 0.3% MoM in August. Food prices increased 4.9% YoY, apparel and footwear by 17.1%, utilities by 14.3%. Headline inflation is set to rise further by year-end, due to ongoing increases in utility payments (including a 28% hike in electricity tariffs this month). The 12% target for end-2016 set by the NBU still looks likely to be met, however.
The rouble weakened 0.6% today at 64.4 against the dollar. OFZ yields widened 2-6 bp today after tightening 5-8 bps yesterday. Most CIS area Eurobonds traded lower after this week’s rally: longer-dated securities of Russia, Kazakhstan and Ukraine’s are wider 9, 3-5 and 6 bp. Azerbaijan-24, Armenia-25 and Belarus-18 yields increased 4,2 and 2 bp respectively.
Uralkali has bought back 2.47% of shares since the start of the latest buyback program. The company plans to buy back 4% under this program, due to end by 19 September. As of 7 September 2016, Uralkali’s free float was around 6.5%.
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