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Norvik Research 16.02.2017

16/02/2017 15:26

Global developments

The rally in stock markets came to a halt today after US indices reached fresh highs yesterday. Both S&P 500 and Dow Jones gained about 0.5% on Wednesday. S&P futures are marginally lower today. EuroStoxx600 is down 1.4% on the day reversing yesterday’s gains. CSI is up 0.5% to the maximum level since mid-December. Nikkei 225 is down 0.5% as the yen jumped 0.4% against the dollar. The dollar index is down 0.5% today after losing 0.1% yesterday. 10-year US Treasury yields are lower 1 bp at 2.48%.

Oil prices are little changed today, even though concerns of a glut are rising again. According to EIA data, US stockpiles reached a fresh historic high rising by 9.5mn bbl in the previous week. Libya’s representative said that the country is planning to increase production from current 0.69 to 0.9 mn bbl/day in H1 2017. Brent prices are up 0.3% on the day at $55.9/bbl.

Russia and CIS area developments and market colour

No explicit references to Russia's exchange rate policy were made after a meeting between President Putin and Economy Minister Oreshkin yesterday. Despite earlier expectations that one of the main topics will be the strength of the FX rate, an official press release cited only a discussion of GDP growth, inflation and real wages. Notably, Oreshkin mentioned that growth was driven by agriculture, chemical industry and a number of other sectors that last year benefited from the weaker rouble. President Putin emphasised the necessity to target inflation in collaboration with the CBR, Government and the Presidential Administration.

The rouble is flat today at 57.2 against the dollar. OFZ yields are 3-4 bps tighter today after widening 4-5 bps yesterday. Yesterday auction for September 2026 fixed coupon OFZ was fairly weak: RUB 25bn of bonds were sold with 4 bps premium to the market. The auction for November 2022 floaters was stronger: RUB 15bn of bonds were sold at an average yield of 10.47% with the demand totalling RUB 51bn. Kazakhstan’s longer term sovereign bonds yields are 4-5 bps tighter today. Ukraine sovereign yields are 2-8 bps wider. Belarus-18 is 10 bps tighter at 5.84%.

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