Russia and Belarus still has not agreed on duty-free crude supply

EMEA Daily

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Review

Yesterday, the Icelandic president Olafur Ragnar Grimsson vetoed the so-called Icesave Bill and said that Icelandic people should decide in a referendum on the Icesave bill issue.
Yesterday, the Romanian central bank (NBR) decided to cut its key policy rate by 50 basis points to 7.50%. The decision to cut interest rates was very surprising to us given the serious political and financial uncertainties. The NBR risks renewed selling pressure on the leu, which would force the NBR to intervene in the FX market to defend the currency. Hence, we believe that this decision could prove counterproductive even though we acknowledge that the economic crisis in Romania is still very deep.
Czech central bank’s Vice Governor Mojmir Hampl said for the Czech daily E15 that the moment of policy tightening is nearing, the question is when the CNB should do it. In our view, we cannot see any reason why the central bank should tighten monetary condition any time soon, given the low inflationary environment and sluggish economic recovery of the Czech economy.
Russia and Belarus still has not agreed on duty-free crude supply. Russia has offered to continue “preferable” terms of oil supply only for domestic consumption, while for export it wants to impose duties. As a counter measure Belarus has asked to impose export duties on electricity exports from Russia to the Baltic region (and Kaliningrad). This decision could further increase electricity prices in Lithuania and also in Latvia.
We expected economic recovery to continue in the Turkish economy going into 2010. We expect this year’s GDP growth of 2.4% y/y.

Preview

There is a fairly light calendar in terms of economic data, with only Hungarian unemployment on the agenda today.

Trading update

It was relatively calm on the EMEA markets on Tuesday and the negative news flow out of Iceland did not spill-over to the EMEA markets, contrary to what we have seen on earlier occasions. That said the Icelandic issue could unnerve markets if fear of a possible Icelandic default were to increase.

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Published On Wed, Jan 6 2010, 06:29 GMT

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