Market Roundup

Thursday proved a less successful day for Russian stock exchanges. The equity benchmarks posted losses on a slew of discouraging news from abroad: the RTS index shed 0.4% and the MICEX index sank 0.2%. Despite strong oil prices, oil & gas plays saw mixed trends: Gazprom ended flat, Lukoil gained 0.9% and Rosneft lost 0.5%. Metal companies emerged as standout decliners, as Severstal dipped 1.7% and NLMK gave up 1.5%. Norilsk Nickel bucked the general trend in the sector, closing 0.6% up. The banking sector looked weak, with VTB pulling back 0.4% and Sberbank ending 1.6% lower. Power utility issuers turned in robust performances, with gains among liquid names in the sector led by OGK-6, which added a solid 4.6% on upbeat corporate news. Russia’s largest telecoms operator MTS gained 0.2% in value. The S&P 500 broad market index closed 0.1% down on Thursday. Financials underperformed the market, shedding an average 0.7%. The Japanese Nikkei 225 index is trading 0.3% down this morning on expectations of weak US labor market statistics. Commodity markets are seeing mixed trends, with base metal prices undergoing correction and WTI oil holding steady above USD 82 per barrel in a sign of a looming correction. Of market-moving data due out today, we highlight a string of data on the US labor market, including the number of personnel in various sectors of the economy and the jobless rate. The data are due out at 4:30 pm Moscow time. In our view, the external environment this morning does not speak in favor of a single clear-cut trend on the Russian equity market today. On one hand, oil prices remain attractive. On the other, market sentiment could be bruised by negative statistics numbers from abroad. We expect the market to open on a neutral note this morning.

On Wednesday the Russian stock market traded up, tracking gains on external markets. Positive statistics on the US labor market acted as a key upside driver. As a result, the RTS and MICEX indexes added 0.4% each. Steel issuers outpaced the market by a large margin, with sentiment buoyed by strong commodity prices, as Severstal rose 2.5%, NLMK climbed 2.4% and Norilsk Nickel ended 0.8% higher. The banking sector looked less impressive: VTB advanced 1.0% and Sberbank (commons) ended the session flat. The oil & gas sector saw mixed trends, with Gazprom adding 0.5% and Rosneft closing 0.7% up. Lukoil shed 0.6% as part of a technical correction. The power utilities showed a relatively robust performance, with RusHydro adding 0.9%.The S&P 500 index advanced 0.6% yesterday on positive news about the number of the new jobs created in the US economy. Consumer stocks, a key sector for the creation of new jobs, outperformed the market, adding 1.1%. Bullishness on the US market has spilled over to Asian stock exchanges, with the Nikkei 225 index trading up 1.5%. Commodity markets are calm, with base metals trading slightly up and WTI oil contracts showing a sluggish retreat to USD 82 per bbl. Today investors will again keep an eye on the US, where another raft of statistical data on the labor market and July retail sales is due out. At 3:45 pm Moscow time, ECB is to come out with its base rate decision. The bank is expected to keep its benchmark interest rate unchanged at 1.0%. In our view, the external factors this morning should be conducive for Russian stock trading, at least in the first half of the day. Trading later in the day will hinge on commodity market trends.

On Tuesday Russian stock exchanges came under downward pressure from Western trading floors, following the release of relatively weak macroeconomic statistical data. By the end of the trading session, the MICEX index sank 1.2% and the RTS index gave up 0.4%.Commodity-based stocks (metals and oil & gas shares) underperformed the market on a limited correction in oil and base metals: Severstal shed 2.3%, Norilsk Nickel dipped 1.7%, Lukoil dropped 1.8% and Gazprom ended 1.6% lower. The banking sector posted milder losses, with Sberbank retreating 1.0% and VTB losing 0.5%. MTS gained 1.1% on news about the upgrade of the outlook for the corporate rating from ‘stable’ to ‘positive’. Razguliay (up 6.3%) acted as a top gainer for the second consecutive session on a rally in grain prices. The S&P 500 broad market index finished yesterday’s session 0.5% down on discouraging macroeconomic statistics numbers. Base materials stocks lagged behind the market, losing 1.6% in value. The Nikkei 225 index is trading down 2.1%, largely on the yen appreciation against the world’s basic currencies. Despite a slight correction on commodity markets, prices there remain at fairly comfortable levels, with WTI oil contracts trading at around USD 82 per barrel. Today all eyes will be on the release of a US jobs report for July and data on mortgage loan applications. The publication of retail sales in the Eurozone is due out at 1:00 pm Moscow time. We regard this morning’s external climate as relatively unfavorable for the Russian stock market. On the other hand, RTS index futures spell a possible rally in stocks, implying high volatility. Trading in the second half of the day may be swayed by the release of macroeconomic statistical data from the US and Western European countries.

On Monday the Russian stock market headed resolutely north, gaining support from robust macroeconomic statistics numbers from the US. The MICEX index closed 2.3% up and the RTS index ended 2.9% higher. Oil & gas stocks outperformed the market on rallying oil prices: Gazprom added 3.7% and Rosneft advanced 3.1%. The mining and metal sector acted in the same manner, as Severstal surged 6.2% and NLMK gained 5.8%. Gains in the sector were led by the Raspadskaya mine, which added a solid 8.5% to its market cap. The banking sector followed the broad market up, with VTB and Sberbank both adding 2.6%. The continuing drought in European Russia and the growth of grain prices as a result have emerged as a strong upside driver for shares in the agricultural sector. As a result, Razguliay Group finished the session 6.8% up. The S&P 500 index climbed 2.2% yesterday, with the market led higher by oil & gas issuers (up an average 3.5%). Asian stock exchanges are seeing upside across the board, with the Nikkei 225 index adding 1.0%, as investors factored in good news about US construction spending. Commodity and resource markets are staging a show of strength, with base metals prices staying at comfortable levels and WTI oil markedly gaining in price, trading at USD 81 per barrel.The PPI in the Eurozone is due out at 1:00 pm Moscow time; June data on personal incomes and expenses in the US is to be released at 4:30 pm Moscow time and manufacturing orders and homes sales in the US are to be published before the final bell. We view this morning’s external environment as unequivocally favorable for the Russian equity market. Strong raw material prices may fuel upside in a number of the sectors, notably, the metal and oil & gas industries. Given the release of a raft of high-profile statistical data today, we do not rule out marked changes in share prices in the second half of the day.

On Friday, Russian equities drifted lower, taking their cue from world stock exchanges amid weak macroeconomic statistics numbers. In the upshot, the RTS index shed 1.59% and the MICEX index pulled back 1.50%. Oil & gas plays trended down on a pullback in oil prices: Gazprom lost 1.6%, Rosneft declined 1.1% and Lukoil eased 2.2%. Financials underperformed the market, as Sberbank sank 2.3% and VTB dipped 2.6%. Steels emerged among top decliners, with Severstal losing 3.9%, NLMK declining 2.6% and MMK ending 0.1% lower. After trading within a narrow range, US equity benchmarks closed on a mixed note on Friday amid ambiguous statistical data. Asian trading is bullish this morning on upbeat earnings reports from major companies in the region, including stronger-than-expected financials from Honda and Hyundai. Commodity markets are moving up, with Brent oil contracts advancing to USD 78.3 per barrel. We view this morning’s news as favorable for the Russian equity market. Higher oil prices will lend support to oil & gas stocks. The gold-mining sector is also likely to price in a significant growth in gold prices. As for market-moving data, we turn investor attention to spending in the US construction sector, due out today.