Market Roundup

On Thursday Russian equity benchmarks extended losses along with world stock markets, being dragged down by weak resource prices and the absence of clear-cut positive news. By the final bell, the RTS index lost 0.9% and the MICEX index was down 0.1% after recouping some of the losses.Metals emerged as top decliners, as Norilsk Nickel shed 1.4%, NLMK gave up 2.8% and Severstal ended 0.6% lower. Raspadskaya shares gained 3.8% on a statement from the mine’s management that production would be revived soon. Banking issuers traded mixed, with VTB shedding 0.6% and Sberbank advancing 0.2%. Similar trends were seen in oil & gas shares: Gazprom eased 0.2% and Lukoil climbed 0.3%. Rosneft shares rose 0.4% on news the company got an oil inflow from a gusher at the Yurubcheno-Tokhomskoye oil field. OGKs largely closed in the red. OGK-4 (up 0.9%) bucked the general trend, as did RusHydro, whose stock valuations shot up 1.6%. Pricing in the accrued negativity, US investors continued with bear speculation, bringing the S&P 500 index down by another 0.5%. Losses were led by high-tech stocks (down an average 1.8%). By contrast, Asian stock markets are seeing a moderate upside this morning, with the Nikkei 225 index adding 0.3% on positive earnings reports from Japanese companies and a weakening yen. After yesterday’s fall, oil is gradually regaining ground, with WTI oil contracts trading in the range of USD 76-77 per barrel. Base metals are on the rebound after hitting a local low. The June trade balance in the Eurozone and data on 2Q GDP growth are due out at 1:00 pm. A raft of US macroeconomic statistical data is due out at 4:30 pm Moscow time. We are primarily interested in the CPI and retail sales numbers for July. In the evening, we expect the release of data on stock inventories in the US economy in June and the CCI from Michigan University. We view conditions on world stock exchanges and commodity market trends as relatively favorable, which should lend support to Russian equity benchmarks. It is quite likely that the Russian equity market will open with moderate gains.

It looks like bearish trends again prevail on the Russian stock market, and have already caused the reversal of the short-term trend. Against a wave of global uncertainty over the sustainability and pace of global economic growth, Russian investors have started to unload assets and reinvest in less risky equities. As a result of yesterday’s session, the RTS index dropped 2.2% and the MICEX index sank 1.5%. Not a single sector escaped losses, but the pace of a retreat was different. Oil & gas plays suffered about the same losses as the broad market: Rosneft fell 1.7%, Lukoil pulled back 1.0% and Gazprom shed 2.6%. The banking sector underperformed the market, as VTB lost 2.3% and Sberbank dipped 2.2%. Metals sustained even heavier losses amid a looming correction: Severstal slumped 3.2%, Norilsk Nickel skidded 2.0% and NLMK took a 3.9% dip. The outcome of trading in power utility stocks makes the overall picture a bit less gloomy: RusHydro added 0.6% and OGK-4 advanced 0.2%. Other OGKs sustained losses in the range of 0.2% (for Enel OGK-5) to 2.5% (for OGK-3). However, trading yesterday brought pleasant surprises as well, as MTS climbed 0.5%, Polyus Gold gained 2.4% on a rally in gold prices and Raspadskaya shares soared 4.3% on a statement by Russian authorities that assistance will be rendered in the revival of the burnt Siberian mine. The weaker-than expected US trade balance in June and fears about slowing growth in the world’s leading economies have caused a collapse of the US equity market, with the S&P 500 index tumbling 2.8%. Industrials underperformed, losing an average 3.7%. Asian trading this morning does not bode well either, with the Nikkei 225 index already losing 1.5% and a firming yen, which is trading close to its 15-year high against the dollar, acting as an additional downside driver . A serious correction is being observed on the oil market, where WTI oil contracts are trading in the range of USD 77-78 per barrel, putting a pressure on the ruble. Base metals continue to cheapen across the board. A string of US macroeconomic statistics data, including unemployment numbers and price indexes for imported goods, are due out at 4:30 pm. Earlier, at 1:00 pm, the June statistical data on industrial production in the euro area is to be released. In our view, all of the factors indicate the high probability that the Russian equity market will open lower. Changes for the better later in the day, although unlikely, cannot be ruled entirely, should a raft of fresh economic data (first and foremost, macrostatistics) appear to be positive.

Our hopes for a rally in the Russian stock market on Tuesday have not materialized. Despite some support from commodity markets, the world’s equity benchmarks, including Russian stock indices, were dragged down by downbeat macroeconomic statistics. As a result, the RTS index dipped 1.8% and the MICEX index shed 1.5%. Downside was seen in liquid names practically across the board. Metals largely underperformed the market: Norilsk Nickel lost 0.4%, Severstal gave up 2.9% and NLMK tumbled 5.2%. The oil & gas sector followed the market lower, as Gazprom lost 1.6%, Lukoil declined 1.9% and Rosneft ended 2.1% lower. The banking sector outperformed, with VTB shedding 1.2% and Sberbank easing 1.1%. The power utilities sector saw mixed trends: OGK-4 ticked up 0.1%, RusHydro inched down 0.1%, OGK-6 pulled back 2.2% and OGK-2 was off 1.4%. Phone operator MTS saw 0.5% sliced off its market cap. The S&P 500 index experienced heightened volatility yesterday. After opening sharply down, the gauge was on the rise later in the day, but failed to recoup all of the earlier losses, closing 0.6% down. Power utilities acted as top gainers, adding an average 0.4%, while high-tech stocks were laggards (down 0.3%). Asian equity markets are trading in the red this morning, with market sentiment dampened by US Fed Chairman Ben Bernanke’s statement that US economic growth would be slower-than-expected. Industrial production slowdown in China in July, caused by the government’s measures to cool the real estate market, has added to downbeat market sentiment. Trade on commodity markets is uneventful, with WTI oil retreating to below USD 80 per bbl and base metals cheapening. Of the high-profile US statistical data, we point out mortgage loan applications in the week ended August 6 (data are due out at 3:00 pm) and the US trade balance in June (due to be released at 4:30 pm Moscow time). In our view, the external climate this morning clearly indicates to the high likelihood that the Russian stock market may open to the downside. How much time will it take for Russian investors to win back losses is another question. We do not rule out that trading may turn bullish in the second half of the day. However, for this scenario to be realized, two conditions are necessary: a rally in commodity markets and positive statistics out of the US.

On Monday the Russian stock market showed growth amid the absence of macroeconomic statistical data from abroad. In the upshot, the RTS index gained 0.7% and the MICEX index advanced 1.1%.Stable commodity prices have lent marked support to metal sector issuers, as Severstal rose 1.8% and NLMK climbed 1.4%. Norilsk Nickel added a solid 3.1% on news about a timely dividend payout. The oil & gas sector is also noteworthy: Gazprom edged up 1.7%, Rosneft added 1.1% and Lukoil ended 0.5% higher. Shares of Russia’s largest banks also gained in value, with VTB rising 1.5% and Sberbank climbing 0.8%. The overall, generally rosy picture in the power utilities sector was somewhat marred by the outcome of trade in OGK-1 shares (down 0.2%), while all other OGKs advanced, with gains led by OGK-4 (up 2.0%). RusHydro finished the session 1.6% up. The main story in the telecoms sector was seen in Rostelecom preferred shares, which jumped 4.7% ahead of the deadline for presentation of the shares for buyout as part of a process to reorganize Svyazinvest telecoms assets. MTS added a modest 0.2%. The S&P 500 broad market index added 0.6% yesterday. All of the sectors included on the index ended the day in positive territory. The telecoms sector outperformed, adding an average 1.1%. By contrast, Asian stock markets are under pressure from external negativity, caused by two main reasons:1) Investor confidence in Australia has fallen to its lowest point in more than a year. 2) Sluggish growth of real estate prices in China, as well weak export growth in July, may be indicative of slowing economic growth rates in China.Commodity markets stayed relatively calm. WTI oil contracts are pulling back as part of a technical correction, but are still hovering above USD 81 per barrel, while base metals are mostly gaining in price. Of the US market-moving data due out today, we note 2Q data on labor productivity and unit costs in the US economic sectors unrelated to agriculture (due out at 4:30 pm), data on warehouse inventory in June (6:00 pm) and the US IBD/TIPP Economic Optimism Index (also due out at 6:00 pm). We view this morning’s external environment as rather uncertain for the Russian equity market. At the same time, we expect the market to be dominated by upbeat trends in the first half of the day, allowing equities to open higher. The probability of this scenario is supported by rallying futures contracts for the RTS index, which are adding 0.2%.

Russian stock indices were on a downward trend on the last day of last week, following commodity markets lower. The RTS index shed 0.5% and the MICEX index ended 0.8% lower.The banking sector acted as a top decliner, with VTB losing 1.2% and Sberbank easing 1.8%. Oil & gas plays headed down, as Gazprom and Lukoil both shed 0.1% and Rosneft dipped 1.1%. Metals were also on the way down amid falling base metal prices: Severstal inched down 0.1% Norilsk Nickel gave up 1.5% and NLMK dropped 1.8%. Prime stocks in the power utilities sector showed mixed trends: RusHydro shed 0.2% while the results of trade in OGK shares ranged from -2.4% (for OGK-4) to +0.8 (for Enel OGK-5). TGK-9 (up 4.4%) led gains among liquid names last Friday, while telecoms operator MTS closed flat. The S&P 500 index dipped 0.4% last Friday. Oil & gas stocks conspicuously underperformed the market, losing an average 1.2%. The Japanese Nikkei 225 index is trading 1.0% lower on the yen appreciation caused by investor concerns that economic recovery in the US and Japan could slow down. Oil is on the rebound after Friday’s fall, with WTI oil contacts trading at around USD 81 per barrel. Base metal prices are little changed, showing mixed trends. We do not expect the release of high-profile statistical data in the US today. Looking towards economic statistics in the Eurozone, we mark out the Sentix Investor Confidence Index, due out at 12:30 pm. In our view, the absence of significant statistics from abroad against the backdrop of strong commodity prices spells a fairly calm trading session. A moderate rally in the Russian stock market is quite possible, as is indirectly confirmed by RTS index futures, which are trading 0.1% higher.