Domestic equities kicked off the week with modest gains amid bullishness on commodity exchanges, but sell-offs continued after lunch. As a result, domestic liquid names ended in negative territory, with the RTS Index sagging 2.54% and the MICEX Index losing 2.47%. An upturn in oil contracts failed to shore up O&G plays, as Gazprom sank 3.8%, Rosneft slid 3% and Lukoil declined 2.3%. Banking names moved south along with the market, as Sberbank plunged 4.9% and Bank VTB pulled back 2.6%. Steels slightly outperformed on the heels of a rebound on commodity exchanges, as Severstal dipped 3.3%, NLMK dropped 1.4% and MMK lost 1.5%.
US equities were again in bearish mode Monday, with the Dow dipping 1%. Uncertainty about the ability of some European countries to cope with their budget deficits continues to put downward pressure on the market and banking names in particular. Asian markets also look bearish today, with financials leading the decliners. Commodity markets are on the rise, but oil trading is marked by heavy volatility, with Brent trading around USD 70/bbl.
We think Tuesday morning’s news flow looks ambivalent for the Russian equity market. On the one hand, weakness on US and Asian exchanges will put pressure on the market. On the other hand, bullishness on commodity exchanges and in US index futures will lend support. Domestic banking stories could slightly underperform today as global financials posted losses. Rising gold futures could have a positive impact on gold plays.
