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Norvik Research 24.11.2016

24/11/2016 17:20

Global developments

Commodity prices continued to rise, led by copper, alongside the dollar’s appreciation in the wake of strong US data yesterday. US Markit PMI for November rose to 53.9, the highest in a year. The US Dollar index is little changed today after yesterday’s 0.7% increase. The Bloomberg commodity index rose 0.3%. US markets are closed today for the Thanksgiving holiday. S&P rose 0.1% yesterday to a fresh all-time high. CSI 300 is 0.4% higher while Nikkei 225 is up 1.0% as the yen fell a further 0.5% to 113 against the dollar. Euro Stoxx 600 is flat. EURUSD is flat today at 1.055. The British pound strengthened 0.1% to 1.245 as market participants continued to digest yesterday’s fiscal policy statement by the chancellor. Gold is up 0.1% after falling about 2% yesterday to the lowest level since February.

The Turkish lira and Eurobonds were supported initially by an unexpected interest rate hike, the first in nearly 2 years. The central bank earlier today raised its overnight and one-week repo lending rates by 25 and 50 bps to 8.5% and 8.0% respectively while keeping overnight borrowing rate unchanged at 7.25%. TRY however has reversed its course and is now 1% down on the day.

Oil prices are flat, following news regarding OPEC’s output cut deal. The latest media reports suggest that Iraq will likely cut production as part of OPEC deal. Brent prices are marginally higher at $49.0/bbl.

Russia and CIS area developments and market colour

The rouble is 1.4% weaker at 64.5 against the dollar. OFZ yields tightened 2-7 bps today. Russia and Kazakhstan longer-term sovereign Eurobond yields are 1-2 wider and 4-6 bps tighter today. Ukraine Eurobond yields are 3-6 bps wider today. Azerbaijan-24 is 2 bps tighter to 5.00%.

Corporate news

Rosneft’s board has approved new domestic bond issuance for RUB 1.07 tn ($17bn). Maturity of new securities cannot exceed 10 years, they will be eligible for purchases by the company’s subsidiaries. The purposes of the new issuance have not been sufficiently detailed but it is widely expected to be used in part in the forthcoming acquisition of the 19.5% stake of the company during next month’s sale. Rosneft was earlier expected to use at least some of its FX deposits to finance this transaction. The latest announcement has put such flows in doubt and is somewhat negative for the rouble’s near-term prospects, in our view.

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