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Norvik Research 20.01.2017

20/01/2017 16:07

Global developments

US Treasury yields and the dollar are higher today ahead of Donald Trump’s inauguration. Yields on 10-year UST are 3 bps higher at 2.50%, 2-year yields are up at 1.24%, following another set of comments late yesterday from Chair Yellen reiterating the Fed’s intention to raise interest rates “gradually over time”. The US dollar index rose 0.2% today. Gold prices are 0.4% lower after closing flat yesterday.

Stock markets globally are rising. S&P futures are 0.2% higher today after the index lost 0.4% yesterday. EuroStoxx 600 is 0.2% higher (but still down 0.6% this week). Nikkei 225 is up 0.3% while China’s CSI 300 is higher 0.8% following the release of better than expected macroeconomic data. Q4 GDP rose 6.8% YoY, above consensus forecast and Q3 outturn of 6.7% YoY. China’s retail sales rose 10.9% YoY in December (consensus: 10.7% YoY).

Oil prices are higher ahead of a meeting by OPEC’s compliance verification committee on 22 January. The Saudi Energy minister has estimated combined output cuts in January at 1.5mn bbl/day. Brent price is 1.2% higher at $54.8/bbl.

Russia and CIS area developments and market colour

Russia’s federal budget deficit widened modestly in December. On our estimates, on a 12-month rolling basis, budget deficit rose to 3.6% of GDP, from 3.5% of GDP in November. Total revenue increased from 15.4% of GDP in November to 16.0% of GDP in December due to higher non-hydrocarbon receipts (in fact, the extra revenue in December, of 0.8% of annual GDP, came from privatization of a stake in Rosneft, the largest oil company). Expenditure rose sharply to 19.6% of GDP, from 18.9% in November. The Reserve Fund was the main source of financing last month, its stock fell to $16bn at end-2016 from $31.3bn in November and $50bn at end-2015.

The rouble is little changed today against the dollar at 59.8. OFZ yields are marginally lower today. Russia’s and Ukraine’s longer-term sovereign Eurobond yields are flat, after the court in London ended hearings in the case of Ukraine’s missed $3bn Eurobond payments without any announcements. Kazakhstan’s yields are 4-5 bps wider.

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