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Norvik Research 03.07.2017

03/07/2017 18:27

Global developments

European stocks are up as oil rises. Euro Stoxx 600 is higher 0.6% today, futures on S&P 500 are 0.5% higher after the index added 0.2% on Friday. US 10Y yields are higher 2 bps at 2.33%. Bloomberg commodity index is 0.3% higher. Gold is down 0.8%.

Oil prices approached 3-week high due to favourable drilling activity data. Baker Hughes reported that active rotary rigs number declined from 758 to 756 for the first time since January 2017. Brent prices rose 2.3% today to $49.0/bbl.

Russia and CIS area developments and market colour

Manufacturing expansion in Russia slowed down in June. Manufacturing PMI in June came out at 50.3 lower than consensus forecast of 51.9 and May’s reading of 52.4. Slowdown is mainly due lower output, new orders and downturns in employment.

The rouble is down 0.7% against the dollar at 59.3. OFZ yields are 1-3 bps lower. Russia’s and Kazakhstan’s longer term sovereign yields are 1 bp higher and 1-2 bps lower today respectively.

Corporate news

Mechel has agreed with Vnesheconombank (VEB) to restructure its debt, according to the company’s CEO Oleg Korzhov. Mechel and VEB agreed to restructure the debt of $167 million. VEB’s supervisory council is expected to approve the terms of restructuring during Q3 2017.

In September 2013 Mechel raised $2.5 billion from VEB as project financing for 13.5 years. According to the lending agreement, the company offered 49% in Elgaugol as a collateral as well as the sale of one “golden” share for 100 roubles. Mechel has managed to utilize only $170 million by the end of 2015.

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