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Norvik research 13.12.2016

13/12/2016 18:53

Global developments

Ahead of tomorrow’s FOMC decision, bond yields declined from recent highs while stock markets in Europe are rising. The dollar index is up 0.1%, after yesterday’s 0.8% drop. EURUSD is 0.2% lower at 1.062. Euro Stoxx 600 is up 0.9% led by Italy’s banking stocks. S&P 500 futures are down marginally. Nikkei 225 rose 0.5% as the yen weakened 0.3% against the dollar, CSI 300 is marginally lower. 10-year US Treasury yields declined 3 bps from yesterday’s close, to 2.44%.10-year German Bunds yields fell 3 bps to 0.37%.

Oil prices are up 0.7% today at $56.1 (Brent), as investors continue to weigh implications of the recent output deal among producers. According to an IEA report, global oil market will move from a surplus to a deficit in H1 2017 provided the OPEC’s target of 32.7mn bbl/day output is met. The IEA now projects a decline in oil stockpiles globally by 600K bbl/day over the next six months.

Rex Tillerson, CEO of Exxon Mobil, has been nominated by Donald Trump as the new US Secretary of State. Provided Tillerson’s nomination wins congressional approval, he would bring to the job strong negotiating skills and a long history of high-level contacts in oil-exporting countries, including Russia.

Russia and CIS area developments and market colour

Russia’s Q3 GDP decline has been confirmed at 0.4% YoY. Agriculture was again the strongest sector, up 3.2% YoY, after 2.0% YoY in Q2. Weakness in retail and wholesale trade deepened to -3.0% YoY, from -1.2% in Q2. Goods trade surplus in October was $6.6bn compared to consensus forecast of $7.0bn. USD export values fell 7.6% YoY, while import values increased 8.2% YoY. The 12-month rolling trade surplus declined by $3.5bn in October to $90.0bn.

Azerbaijan is contemplating a fresh set of anti-crisis policy measures. According to a local MP cited by Bloomberg yesterday, President Aliyev has instructed the government to come up with such a package within the next couple of weeks. While the timing (in particular, the strong recovery in oil prices) is favourable, any easing of currency controls may initially lead to further currency weakness, after the 14% slide in 2 months, due to pent-up demand. The stock of FX reserves (net of fiscal deposits) rose marginally in November to $4.0bn.

The rouble is marginally stronger today against the dollar, at 60.9. OFZ yields are little changed. Russia and Kazakhstan longer-term sovereign Eurobond yields are 3-4bps tighter. Azerbaijan-24 and Belarus-18 are 2 and 4 bps lower respectively, while Ukraine sovereign bonds are 0-4 bps wider.

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