Russian equity benchmarks moved higher Thursday on groundswell of support following the US President’s State of the Union speech which highlighted a recommitment to economic stimulus measures through tax benefits and subsidies. As a result, the RTS Index advanced 1% and the MICEX Index added 1.1%.
Steels led the gainers, especially stocks of US-oriented businesses, with Severstal soaring 6.2%, NLMK jumping 4.9% and MMK adding 1.1%. O&G plays advanced largely along with the market, as Gazprom edged up 0.2%, Lukoil grew 1.1% and Rosneft climbed 1.5%. Banking names also moved higher, while Bank VTB stood out (up 3.2%) and Sberbank added 0.6%. In view of falling gold prices precious metal stocks posted losses, as Polyus Gold declined 1.4% and Polymetal dipped 0.8%.
Bearish sentiment prevailed in US trading Thursday, with S&P 500 Index ending 1.2% lower, while commodity and hi-tech stocks underperformed. Investor worries about possible monetary tightening put pressure on the market. Market players read in the Fed’s comments hints of future interest rate hikes. Negative trends in the United States spilled over to Asian trading floors as well, with losses in regional benchmarks reaching 2%. A steadily rising greenback continued to put pressure on commodity markets, as Brent dropped to USD 72/bbl and industrial non-ferrous metals continued to slide.
As we can see, Friday morning's news flow look unfavorable for Russian stocks and we expect all of Thursday gains to be erased in early trading. Commodity plays could come under the heaviest pressure. Telecoms and power utilities look set to outperform. As for drivers, US GDP numbers for 4Q 2009 (consensus forecast calls for a 4.7% increase) are due out in the second half of today’s session.
