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Norvik Research 07.12.2016

07/12/2016 16:30

Global developments

Global stocks are rising amid expectations that ECB will extend its asset-buying program. Euro Stoxx 600 is up 0.8%, the 3rd consecutive day of gains. S&P 500 futures are marginally higher after rising 0.3% yesterday. Asian stocks are stronger: CSI 300 is up 0.5% while Nikkei 225 is 0.8% higher. 10-year UST yields lost 1 bp yesterday and today are at 2.37%. The dollar index is broadly flat. GBPUSD eased 0.8% after rising to a 2-month high on Tuesday.

Oil prices are lower despite positive inventories data. API reported that crude oil inventories declined 2.2 mn bbl in the previous week. Brent prices are 0.5% downtoday at $53.7 per bbl after falling 1.8% yesterday.

Russia and CIS area developments and market colour

Ukraine’s gross international reserves contracted 1.6% in November. Reserves declined $244mn from October to $15.3bn mainly due to valuation changes (including the gold component by $68mn). FX outflows included $147.2 mn in debt service, the main inflows were net FX interventions of $80mn and a $60mn transfer from the EU. The NBU said that political tensions have affected the local currency market, complicating its task of buying more FX into reserves.

Russia’s inflation in November was below expectations. The 5.8% outturn, compared to 6.1% in October, was better than the 5.9% consensus. Officially measured core inflation fell to 6.2% YoY from 6.4% in October. Food price inflation fell to 5.2% YoY from 5.7% while non-food goods inflation fell to 6.7% from 7.0%. Inflation appears to have benefited from the relative strength of the exchange rate. The good inflation data and the strength of oil prices in absence of visible demand pressures add to the case for further policy easing but the CBR is likely to keep its guidance and may cut rates again only in early February.

The rouble is stronger 0.2% at 63.7 against the dollar. OFZ yields are 4-9 bps lower. Russia and Kazakhstan longer-term sovereign Eurobond yields are 3 bps tighter. Ukraine sovereign bonds are 7-15 bps tighter.

Corporate news

Russia’s Tatfondbank may get support from the CBR, at the expense of core shareholders. According to today’s Kommersant daily, recapitalization needs are close to RUB 80bn, likely to come via dilution of the key shareholder (the government of Tatarstan) and possible bail-in of largest corporate depositors (also controlled by the shareholder). Prices for the bank’s rouble bonds fell some 35 pps today, yields on April 2017 Eurobonds widened only marginally to 11.4%.

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