Ahead of the constitutional reform referendum in Italy next Sunday, demand for risk assets weakened. A defeat for the government would likely trigger Prime Minister Renzi’s resignation and may lead to early elections. Italian banking stocks led European stocks lower, with Euro Stoxx 600 down 0.6%. S&P futures are 0.3% lower, after a fresh all-time high on Friday. CSI 300 is up 0.4% while Nikkei 225 is marginally lower. The dollar lost 0.4% against a basket of currencies, stepping back from multi-year highs. The Turkish lira is stronger 1.0% today. 10-year US Treasury yields are down 3 bps to 2.33%. Gold is up 0.6% on the day, bringing its losses since the US elections to 6.7%.
Oil prices have recovered some of Friday’s losses as concerns about the outcome of this week’s OPEC meeting persist. Senior OPEC negotiators are expected in Moscow today for last-minute talks about Russia’s support for the OPEC output deal. Late last week, Saudi officials indicated that a cut in overall output level may be delayed, causing oil prices to fall. Meanwhile, OPEC output in October reached a historic high of 33.6mn bbl/day, 0.7% above September. The Baker Hughes rotary rigs count increased by 3 last week to 474. Brent prices are up 3% today to $47.8/bbl following Friday’s 5% drop.
Besides the OPEC meeting on Wednesday 30 November and the Italian referendum on 4 December, this week’s main events include the release of US labour market data on 2 December. Russia’s investors will look for possible new policy details in president Putin’s annual address to parliament on 1 December.
Russia and CIS area developments and market colour
Ukraine may resume gas purchases from Russia, after a 1-year pause. This was stated on Friday in a press release by Ukraine’s Naftogaz. The scope for deliveries of 1.5-4.0 bn cubic meters of gas this winter was discussed between Russian and EU officials earlier in the day.
The rouble is 0.3% weaker at 65.0 against the dollar. OFZ prices are little changed today following a weak session on Friday that saw yields widening up to 9 bps. Russia and Kazakhstan longer-term sovereign Eurobond yields are broadly unchanged today. Ukraine Eurobond yields are 2-6 bps wider.
Gazprombank will tomorrow collect bids for RUB 10bn of BO-12 3-year bonds. The 9.75-10.0%coupon range is in line with yield to a 2-year put of 9.99-10.25%.
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