WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: The majority of Asian equity indices opened higher on Tuesday following record highs in Wall Street overnight after the end of a three-day US government shutdown. In FX markets, the US dollar pared some of its recent losses following the US government reopening. Following BoJ’s decision to maintain its policy stance unchanged, the yen weakened against the US dollar. Governor Haruhiko Kuroda’s echoed his commitment to ultra-easy monetary policy and highlighted that there is still some distance to meeting the 2.0% inflation target. Elsewhere, the GBP/USD hit a post-Brexit referendum high of 1.4003 in Asian trade, benefiting from both positive UK macro data and optimism for a favorable deal with the EU. In the government bond markets, treasury yields fell for the first time in five days after the end of the US government shutdown. European bonds followed suit with Spain’s 10-year yield dropping to a seven-month low of 1.36%, continuing to receive support from a credit rating upgrade by Fitch to “A-” with a stable outlook from BBB+ on Friday amid improving growth prospects and easing political risks.
GREECE: The 22 January Eurogroup acknowledged the implementation of most of the prior actions for the 3rd programme. The fourth loan tranche, which will amount to EUR6.7billion, will be disbursed to Greece in two disbursements conditional on the implementation of the remaining prior actions and the continuous and unimpeded flow of electronic auctions. At the same time the Greek authorities are expected to develop in collaboration with the institutions a comprehensive growth strategy well before the end of the programme. As regards debt relief, the Eurogroup noted that the Euroworking Group has started technical work on a growth-adjustment mechanism as part of the medium term debt relief measures to be implemented if necessary in line with the 15 June 2017 Eurogroup.
SOUTH EASTERN EUROPE
CESEE MARKETS: Emerging markets rallied earlier on Tuesday on improved investor sentiment globally following news about the end of a three-day government shutdown
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