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Norvik Research 07.02.2017

07/02/2017 20:43

Global developments

The dollar is rising against peers following hawkish comments from a senior Fed official. Philadelphia reserve bank president Harker warned that March Fed meeting is a live option for a rate hike should wages rise and job market and growth momentum continue. The dollar index is up 0.6% today after a 0.2% increase yesterday. 10-year UST yields are up 3bps at 2.43% after a 5 bps drop yesterday. Yields on 10-year French and Italian government bonds declined by 2bps today, to 1.10% and 2.34%, respectively. Greece’s 2-year note yields rose closer to 10% in the aftermath of the IMF’s mixed appraisal of the country’s remaining fiscal consolidation needs. Most equity markets are higher today, with S&P 500 futures up 0.3% after yesterday’s 0.2% increase and EuroStoxx 600 rising 0.5%. Gold prices slipped 0.5% from yesterday’s post-November highs.

Oil prices continue to weaken against the backdrop of rising US stocks. Brent prices are down 1.3% today at $55.0/bbl after falling 1.5% yesterday. US crude inventories are estimated to have risen by 2.5 mn bbl last week.

Russia and CIS area developments and market colour

The rouble is 0.8% weaker at 59.4 against the dollar on the first day of the central bank’s planned FX purchases on behalf of MinFin. Finance Minister Siluanov today pledged that any FX interventions on behalf of the government will be done “carefully” in order to avoid volatility. Siluanov acknowledged that a situation when Minfin is buying FX into reserves and at the same time spending cash from the Reserve Fund was possible.

Russia’s central bank expects real wages to recover only gradually this year, without excessive inflationary pressures. This notable prediction is reflected in the CBR’s latest report on the state of the economy. The CBR has taken the latest official GDP estimates for 2016 (consistent with seasonally-adjusted growth in Q4) at face value while warning that the exact picture about last year’s performance was unlikely to emerge before Q2.

The rouble is 0.5% weaker at 59.2 against the dollar as MinFin started FX interventions today. OFZ yields are 1-5 bps higher today. Russia’s and Kazakhstan’s longer term sovereign bonds yields are 1-2 bps wider today, Ukraine sovereign yields are 2-3 bps higher.

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