Market Roundup

On Thursday the Russian stock market corrected upward after several days of downside in a row. As a result, the RTS index added 1.7% and the MICEX index advanced 1.6%. Oil & gas plays posted moderate gains, as Gazprom rose 2.1%, Rosneft edged up 0.08% and Lukoil climbed 0.7%. The banking sector outperformed the market, with VTB surging 3.1% and Sberbank gaining 3.5%. Solid gains were also seen in metals, as NLMK hiked 2.4%, Norilsk Nickel grew 3.2% and Severstal spiked 3.1%. Power utilities showed a moderate growth, lagging behind the market: RusHydro added 1.2% and OGKS also traded up, with gains ranging from 0.4% (for OGK-4) to 1.8% (OGK-2). The market was led higher by telecoms, with Rostelecom (prefs) rising 4.6%, North-West Telecom (prefs) shooting up 4.1% and Volgatelecom (prefs) ending 3.9% higher on news about dividend payouts. MTS added 1.2% to its market cap. The S&P 500 index sank 0.8%, shrugging off positive news about primarily jobless claims in the US. High-tech stocks underperformed the market, shedding an average 1.2%. Asian benchmarks are showing mixed trends this morning on news that US authorities may lower outlook for economic growth rates in 2Q2010. The Nikkei index is adding 0.3% Oil is correcting up, with WTI oil contracts trading at slightly above USD 73 per barrel. Industrial metals are gaining in price. The US 2Q2010 GDP and consumer spending data are due out at 4:30 pm, while the CCI from the Michigan University is to be released at 5:55 pm Moscow time. We view this mornings’ news as quite ambiguous. In our view, the likelihood that the Russian stock market will open in the red is fairly high. The assumption is specifically backed by negative dynamics of RTS index futures. Banking issuers may also come under pressure.

The Russian stock market saw uncertain trends yesterday as investors waited for signals from abroad, with mixed trends seen in the benchmark stock indices. The MICEX index ended the session 0.4% lower while the RTS index advanced 0.6%. Russian auto manufacturers acted as standout gainers, which we link to their good prospects for sales next year: Avtovaz rocketed 7.7% and Kamaz surged 3.3%. Blue chip stocks were a mixed bag. In the oil & gas sector, Gazprom and Rosneft shed 0.6% each while Lukoil gained 0.6%. Similar trends were observed in the power utilities sector; RusHydro specifically edged up 0.2%. Trading in telecoms stocks was relatively uneventful, with MTS adding 0.2%. OGKs were mostly in decline, with losses in the sector led by Enel OGK-5 (down 1.4%). Key issuers in the metal sector ended the session lower: NLMK lost 2.2%, Severstal declined 1.7% and Norilsk Nickel slid 0.9%. The largest state banks emerged among top losers: VTB dipped 2.7% and Sberbank gave up 1.9%. The S&P 500 index climbed 0.3% on Wednesday as part of a technical correction on the release of relatively weak US economic statistics numbers. Health care stocks outperformed the market, adding 0.9%. Asian stock markets are also correcting upward, with the Nikkei index adding 0.4%. Oil is gaining in price, with WTI oil contracts trading around USD 73 per barrel. Trading in industrial metals is unrepresentative. As for market drivers, the M3 money supply in the Eurozone is due out at 12:00 pm. In the second half of the day, US jobless claims and 2Q data on the mortgage market are to be released. In our view, this morning’s external climate is conducive for Russian trading and we expect Russian equity benchmarks to open higher. The likelihood of this scenario is backed by rallying futures contracts for the RTS index. Banking issuers retain a good chance to win back yesterday’s losses.

On Tuesday the Russian stock market trended down in the absence of any upside drivers, which sent the equity benchmarks down, with the MICEX and RTS indexes shedding 2.0% each. The banking sector markedly underperformed the market, as VTB declined 2.2% and Sberbank dropped 3.4%. Metals turned in weak performances: NLMK tumbled 3.4%, Severstal gave up 2.9% and Norilsk Nickel eased 2.6%. Oil & gas plays also were down, with Gazprom sliding 1.9%, Lukoil skidding 0.9% and Rosneft losing 1.8%. Power utility stocks closed in negative territory: RusHydro dipped 1.3% while losses in OGKs ranged from 0.1% (for OGK-4) to 3.9% (OGK-2). MTS showed resilience, losing a mere 0.9%. US investor fears escalated yesterday on the release of extremely weak US secondary home sales. The S&P rating agency added fuel to the fire by downgrading Ireland’s sovereign rating by one notch, citing its analysts concerns over mounting expenses on keeping the national banking system afloat. As a result, the S&P 500 broad market index dropped 1.5% by the final bell. Japan’s Nikkei 225 index is 2.0% down. WTI oil contracts are trying to claw back earlier losses, but have failed to settle above USD 72 per barrel. The basic industrial metals are cheapening. As for market-moving data, we turn investor attention to US durable goods orders in July, due out at 4:30 pm, and another raft of US real estate market statistics (6:00 pm). We view this morning’s news as downbeat for the Russian equity market. It is highly likely that equity benchmarks will kick off to the downside. Banking stocks, which are especially sensitive to the macroeconomic environment, could come under the heaviest pressure. As for trading in the second half of the day, the situation could be reversed only by a miracle. This could happen if US macroeconomic statistics appear positive.

The first session of the ongoing week revealed no clear-cut trends on the Russian stock market. There were no serious grounds for massive sells-offs on the market, nor were there upside drivers that could be priced into stock valuations. As a result, the MICEX index posted fractional gains, while the MICEX index closed under 0.1% up. Metals were practically the only sector that saw upside in blue chips across the board: NLMK gained 0.7%, Norilsk Nickel advanced 0.5% and Severstal rose 1.8%. All the other sectors turned in mixed performances. In the oil & gas sector, Gazprom climbed 0.4%, Lukoil was off 0.1% and Rosneft pulled back 0.5%. Banking issuers also traded mixed, as VTB edged up 0.2% while Sberbank slid 0.4%. RusHydro lost 1.2% in value, denting sentiment among investors in its shares. Gains were led by TGK-9, which added a solid 4.0%. MTS also traded up, gaining 0.5%. The US equity market saw no marked reasons yesterday to turn bullish, with the S&P 500 index dropping by another 0.4%. The market was led lower by industrials, down an average 1.1%. Asian trading is again under pressure this morning, with the Nikkei 225 stock average shedding 1.3% on expectations of weak home sales numbers out of the US. Oil is in retreat, with WTI oil contracts hovering below USD 73 per bbl. Industrial metals are also mostly losing in price. As for market drivers, manufacturing orders in the Eurozone in June are due out at 1:00 pm, while data on home sales on the US secondary market in July is to be released at 6:00 pm. Under the circumstances, the likelihood is high that the Russian stock market may see another day of sell-offs. We expect Russia’s benchmark stock indexes to open lower this morning. At the same time, a short-term trend reversal is not ruled out should macroeconomic statistical data appear positive.

Last Friday, Russian stock indexes again came under pressure from external negativity, as weak raw material prices and bearish trends in the world’s leading equity benchmarks predetermined the outcome of trading on the last day of the week: the RTS index sank 1.4% and the MICEX index declined 0.6%. Oil & gas names generally underperformed the market: Gazprom notably lost 1.0% and Rosneft gave up 0.7%, while Lukoil gained 0.3% in value on news about the forthcoming payment of USD 438 mn to the company for the Kazakh project. The banking sector finished the session with expectedly weak results, as Sberbank shed 1.4% and VTB slid 0.5%. Power utilities were a mixed bag, with RusHydro specifically ending 2.1% lower. MTS advanced 0.2% amid investor expectations of robust 2Q2010 financials from the company. The US S&P 500 index lost 0.4% last Friday, with investor pessimism stoked by weaker-than expected macroeconomic statistics numbers. Telecoms looked worse than the broad market, shedding an average 1.3%. Asian equities are showing different trends this morning amid growing uncertainty on the market. The Nikkei 225 index is losing 0.6% on rekindled investor concerns over the sustainability of economic growth and the yen appreciation against the world’s key currencies, which is trading near its peak levels for the past seven weeks. Oil is fractionally on the rise against a weakening dollar, with WTI oil contracts trading slightly above USD 74 per barrel. Base metals are mostly falling in price. As for market-moving data, we point out the PPI in the EU (due at 12:00 pm today) and the CCI in the Eurozone for the current month (due at 6:00 pm). As for the key economic data from the US, the Chicago Fed National Activity Index is due out at 4:30 pm Moscow time. We regard this morning’s external climate as rather unfavorable for the Russian equity market. At the same time we believe that investors, tired of the market situation, which has resembled a roller coaster of late, will be glad to use any positive signals for purchases. That investor optimism is still in place is evidenced by positive dynamics of RTS index futures (up 0.4%).