Market Roundup

On Friday the Russian stock market closed in positive territory as benchmarks gained support from a rally in oil prices in the second half of the day. In the upshot, the RTS index gained 0.63% and the MICEX index advanced 0.85%.Despite an upsurge in oil prices, oil & gas plays closed on a mixed note, with Gazprom adding 1.8%, Rosneft gaining 0.8% and Lukoil easing 0.6%. Domestic banking issuers outperformed the market, as Sberbank hiked 2.3% and VTB climbed 1.9%. Steels saw uneven demand: Severstal rose 1.2%, MMK edged up 0.6% and NLMK lost 1.0%. On Friday US equity benchmarks reaped marginal gains in the absence of any significant drivers. Asian equities are steadily on the rise this morning, with marked sentiment buoyed by a decision by China’s Central Bank to make the national currency rate more flexible, as a result of which the yuan is gaining in value. Commodity markets are also showing upside, with Brent oil contracts approaching the USD 80per bbl mark. We regard the morning’s news as positive for the Russian equity market. A rapid growth in oil prices may emerge as a significant upside driver for oil & gas stocks, while positive changes on the international forex market may have positive effects on the market cap of domestic banks.

It looks like international investors have opted to take a pause and lock in gains after a series of trade sessions that have closed in positive territory, which has driven global equity benchmarks down. Russia has seen similar trends. On Wednesday, the MICEX index slid 0.1%, while the RTS index closed 0.4% up under the impact of currency exchange rates. No definite trends were seen in blue chip shares, except for the metals sector, where stocks of the largest players unanimously drifted lower: Norilsk Nickel declined 0.7%, NLMK pulled back 1.2% and Severstal sank 1.4%. The oil & gas sector mostly traded in the red, as Gazprom slid 0.7% and Rosneft pulled back 1.4%. Lukoil bucked the general trend in the sector, finishing the day 0.9% up, which came as a pleasant surprise. Power utility stocks also traded mixed, with RusHydro retreating 1.4% and OGKs posting results in the range of minus 0.1% (for OGK-1) to plus 5.1% (for OGK-3). Sberbank likewise showed mixed performances, as its commons gained 1.1% and prefs lost 1.1%. VTB added 1.2% to its market cap. On Wednesday the S&P index declined 0.1%. Consumer stocks emerged as top losers (down 0.7%), while power utility stocks outperformed the market (up 0.6%). Nikkei is trading 0.6% down at the moment, WTI oil contracts are slightly below the USD 77 per bbl mark and most base metals are trading marginally down. As for market-moving data, jobless claims in Greece in the first quarter of 2010 are due out today, as are the US first-quarter balance of payments, a jobs report, the PPI for May and the Index of Leading Economic Indicators. In our view, this morning’s news may be conducive for Russian equity benchmarks to open in the red. RTS index futures (down 0.6%) are evidence to this. It is quite likely that the market will be dragged down by metal stocks on a retreat in metal prices. As for trading later in the day, variants are possible. Much will hinge on the macroeconomic statistics released, in our opinion.

Tuesday appeared to be a productive day for Russian investors. Gaining support from a rally on global stock markets, Russian equity benchmarks headed resolutely north, with the RTS index soaring 2.9% and the MICEX index adding 2.6%. Rallying oil prices triggered an upside in blue chip stocks in the oil & gas sector, as Gazprom added 2.1%, Rosneft gained 2.6% and Lukoil advanced 1.0%. Russia’s largest banks turned in impressive results: VTB jumped 4.1% and Sberbank also posted hefty gains (up 5.1% on commons and up 2.8% on prefs). Electric utility stocks outperformed the market by a large margin, with RusHydro finishing the session up 4.7%. Quotes for OGK shares grew in the range of 2.3% (for Enel OGK-5) to 6.8% (for OGK-3). Metals also traded up with the market, as Norilsk Nickel rose 2.5%, Severstal advanced 3.8% and NLMK climbed 2.7%. The US stock market saw heightened volatility over the past several weeks. However, after a series of sharp falls during the past sessions, US benchmarks were paring losses yesterday, with the S&P index rising 2.3%, an impressive gain by developed stock market standards. Gains were led by high-tech stocks and industrials (up an average 2.9%) while consumer shares underperformed the market (up 1.4%). Bullishness prevails on Asian stock exchanges this morning, with the Nikkei index trading about 2.% up over yesterday’s close. Oil is on the rise, with WTI-brand oil trading at around USD 77 per barrel and practically all base metals gaining in price. A raft of significant macroeconomic data are due out today, including homes sales, manufacturing results, PPI and the Consumer Confidence Index from the US and May inflation in the Eurozone. In our view, information about wages in Spain in 1Q2010 could also be of interest to investors. In our view, this morning’s external environment is quite conducive for Russian trading. We expect an upside in most Russian stocks in early trading today. The further course of trading will to a large extent hinge on the reaction triggered by the released macroeconomic statistics on Western trading floors.

During the last trading session before the extended holidays, Russian equities had a chance to close in positive territory but the general nervousness on the market caused by external negativity dragged benchmarks down. As a result, the RTS index declined 0.2% and the MICEX index closed 0.3% down. No single trend was seen in blue chip shares: Gazprom and Roneft lost a respective 0.8% and 0.6%, while Lukoil gained 0.6%. A similar picture was observed in the banking sector, where VTB advanced 0.5% while Sberbank pulled back (down 1.4% on commons and 1.8% down on prefs). Metals suffered losses across the board, as Norilsk Nickel inched down 0.1%, NLMK shed 0.4% and Severstal declined 1.5%. Most gencos moved fractionally up, with OGK-1 and OGK-2 adding 0.1% each, OGK-3 climbing 0.6% and Enel OGK-5 rising 0.3%. OGK-4 bucked the general trend (down 2.9%), as did OGK-6 (down 0.9%), while Rushydro ended flat. Russia’s largest cellular operator MTS finished the day 0.2% up. Yesterday global stock markets traded under pressure from the news that Moody’s rating agency had downgraded its rating of Greek state bonds by 4 notches at one stroke. The S&P broad market index sank 0.2%, with the market led lower by base materials stocks (down 0.8%) and utility and consumer stocks (up 0.4% each) looking better than the broad market. The environment is relatively calm this morning and in the absence of negativity the Nikkei index is adding 0.3%. WTI oil is stable, trading in the range of USD 75-76 per barrel, and most base metals are on the up. In the absence of essential statistical data from the US, investors will mostly keep an eye on EU countries, notably on the trade balance in the euro area for April, the German Business Confidence Index and Spanish real estate price indicators. We view that this morning’s news as relative neutral for the Russian equity market and the absence of apparently negative news may be regarded as weak positivity on the market. It is not ruled out that the equity benchmarks will open higher on the back of a rally in Japan. At the same time, we point out the continuing heightened volatility on the market, which may put downward pressure on Russian stocks in the event the flow of news during the day gives grounds for the persistence of bearish trends on the market.

On Thursday the Russian stock market moved up, following in the footsteps of global stock and commodity exchanges. In the upshot, the RTS index rose 1.83% and the MICEX index advanced 1.9%. Oil & gas plays saw uneven demand, despite a rally in oil prices: Gazprom eased 0.3%; Rosneft added 0.7% and Lukoil hiked 4.1%. Domestic banking issuers traded in sync with the market, with Sberbank climbing 1.9% and VTB ending 1.9% higher. Steels again slightly underperformed, as Severstal edged up 1.0%, MMK rose 0.8% and NLMK gained 1.2%.US equity benchmarks posted hefty gains on Thursday, with the S&P500 index adding 3%, as market sentiment was buoyed by a raft of upbeat statistical data from a number of Asian countries, where benchmarks are also seeing upside this morning. Commodity markets are on the up, with oil prices extending yesterday’s gains and Brent trading at USD 75.2 per barrel. We view this morning’s news as favorable for the Russian equity market and expect to see upside in most liquid names at the opening today. Oil & gas shares may outpace the market on rallying oil prices. It is not excluded either that steels will play catch-up after falling behind the market. As for market-moving data, US retail sales are due out at 4:30 pm Moscow time.