Market Roundup

A moderately positive flow of news and robust commodity prices fed a rally in Russian equity benchmarks yesterday: the MICEX index gained 1.7% and the RTS index advanced 2.0%. Oil & gas plays traded in stride with the market, gaining support from rallying oil prices, as Gazprom rose 2.2%, Lukoil edged up 0.6% and Rosneft climbed 1.6%. Rosneft prefs emerged as a top gainer, adding a hefty 10.8%. The banking sector also reaped gains, with Sberbank adding 2.7% and VTB advancing 1.3%. Metals were among standout advancers, leaving the market behind, as Norilsk Nickel hiked 1.9% and NLMK added a solid 2.4%. Power utilities turned in moderately positive performances, with gains in the sector led by RusHydro (up 2.1%) and OGK-3 (up 2.4%). The S&P 500 index closed 0.4% down yesterday. Power utility stocks (down 1.6%) noticeably underperformed the market, while financials (up 0.2%) outperformed. Asian trading is bearish this morning on the release of downbeat employment and manufacturing data from Japan.Commodity markets remain relative calm, with WTI oil contracts correcting to USD 78 per bbl and most base metals gaining in price. June data on the European labor market and preliminary figures for July inflation are due out at 1:00 pm Moscow time today. A raft of essential statistical data, including the US GDP in 2Q2010, is to be released at 4:30 pm. We regard this morning’s news as moderately unfavorable for the Russian equity market. However, the market may receive a boost from strong commodity prices. In general, the market is expected to open on a neutral note this morning (possibly, to the downside). Further trading will hinge on the above-indicated factors.

On Wednesday Russian equity benchmarks drifted lower under pressure from external factors: the MICEX index shed 0.5% and the RTS index was off 0.4%.Losses were sustained across the board, with decliners led by oil & gas plays, which followed oil prices lower: Gazprom shed 1.5% and Rosneft dipped 3.2%. Lukoil bucked the general trend, adding 3.4% to its market cap on news about the buyout of its shares from Conoco Philips. Metals likewise posted lackluster performances, as Norilsk Nickel declined 1.5%, NLMK dropped 2.4% and Severstal eased 1.3%. Most power utility stocks finished the session in the red. Robust 1H financials form Enel OGK-5 brought a pleasant surprise, which saw its shares gain 0.9% in value on the news. Sberbank saw 0.7% wiped out from its market value, while VTB ended the day flat. PIK Group emerged as a top gainer, adding 4.4% on news about the planned IPO. The S&P 500 broad market index closed 0.7% down yesterday on the publication of weaker-than-expected statistics numbers. Health care stocks (down 1.4%) markedly underperformed the market. Asian stock markets are heading south this morning as part of a market correction, with the Nikkei 225 index trading 0.4% down from yesterday’s close. Commodity markets are more or less calm, with WTI oil contracts showing marginal upside, trading slightly above USD 77 per barrel, and base metals either gaining or losing in price in about equal proportions. A US jobs report is due out today at 4:30 pm Moscow time. We also expect the release of a raft of statistical data from the Eurozone at 1:00 pm, including the CCI and the key indicators showing the business climate in the region. We regard this morning’s external environment as unfavorable for the Russian equity market and we expect benchmarks to open lower this morning. Equities may extend losses heading into the final bell if macroeconomic statistics from abroad appear discouraging.

On Tuesday, the Russian stock market posted moderate gains, with the MICEX index adding 0.3% and the RTS index climbing 1%. The market gained support from rallying European stock indexes and comfortable commodity prices. Oil & gas plays mostly outperformed the market, as Gazprom rose 1.3%, Rosneft edged up 1.1% and Tatneft (prefs) closed 1.6% up. Lukoil bucked the general trend, ending the session marginally down. The banking sector also outperformed, as Sberbank added 0.5% and VTB advanced 2.0%. No singled trend was seen in the metal sector, where Belon (up 7.1%) and Severstal (up 2.5%) emerged as standout advancers, while Mechel (down 1.7%) and Norilsk Nickel (down 1.1%) were laggards. US trading floors saw heightened volatility on Tuesday, with the S&P500 broad market index shedding a modest 0.1%. The market was led lower by consumer stocks. Asian stock markets are heading resolutely north this morning on the back of positive corporate earnings reports. In commodity markets, oil has retreated to USD 76-77 per barrel, while base metals are gaining in price. We view this morning’s news flow as conducive for a continuing rally in Russian equities and expect to see upside at the opening. We highlight banking shares as the potential favorites this session, while oil & gas plays may come under pressure from unimpressive dynamics in oil futures contracts. The release of data on durable goods orders in the US in the second half of the day may seriously impact the alignment of forces on the market.

The first trading session this week passed on a positive note for Russian investors. The positive stress tests of European banks have given a leg-up to Russian equity benchmarks. As a result, the RTS index added 1.3% and the MICEX index advanced 1.2%. Gains on Monday were led by Mechel, which added a solid 7.3% to its market cap on the support voiced by Prime Minister Vladimir Putin to the company and its management. Severstal climbed 3.2% on robust quarterly steel output numbers. Other issuers in the sector posted softer gains, as Norilsk Nickel edged up 0.8% and NLMK rose 1.8%. The oil & gas sector has brought another pleasant surprise. After the Finance Ministry stated plans to privatize Transneft, its preferred shares moved resolutely up, gaining 7.3% in value. Rosneft added 3.4% on robust 2Q financials. Otherwise, trading in the sector was mostly uneventful: Gazprom climbed 0.7% and Lukoil finished 1.0% higher. The banking sector posted relatively solid gains, with VTB rising 1.3% and Sberbank advancing 1.2%. Trading in power utility stocks was mostly low-key, with most gencos going sideways, except for Enel OGK-5 (up 1.0%) and OGK-6 (up 1.2%). MTS finished the day 0.6% higher. The S&P 500 broad-market index closed 1.1% up yesterday, gaining support from upbeat US home sales data. Industrials (up 1.7%) led the market higher. This morning, the Nikkei 225 index is trading flat, with growth in the equity benchmark being hindered by the yen appreciation. Commodity markets look fairly good, with base metals gaining in price and oil contracts staying at fairly comfortable levels after an insignificant pullback, with WTI oil trading slightly below USD 79 per barrel. Today we expect the release of the US industrial production and consumer confidence indices. As for Europe, ECB is to release data on the EU money market (M3 monetary aggregate), due out at 12:00 Moscow time. Investors will also keep an eye on the publication of financial results from an array of major Japanese firms. We view this morning’s external climate as relatively conducive for a rally in the Russian equity market. Comfortable commodity prices could give a lift to oil & gas plays and metals. Banking issuers may assume the lead in the second half of the day (if European stats numbers live up to expectations). Other issuers may also extend a rally, which is specifically true of Transneft shares.

Last Friday appeared to be a relatively calm day for the Russian equity market. The RTS index added 0.4 after trading up practically throughout the session, while the MICEX closed slightly down after seeing heightened volatility. Gazprom shares lost 0.8% in value, while Rosneft gained 4.9% on the expectations the oil major will release robust 2Q financials. Russia’s largest banks finished the day in the red, with VTB pulling back 1.6% and Sberbank losing 0.9%. No single trend was seen in the metal sector, as Norilsk Nickel advanced 1.3% and Severstal retreated 1.5%. The power utilities sector saw similar trends, as RusHydro eased 0.3% while most OGKs posted gains, with growth limited to 0.3%. The S&P 500 index, the leading indicator of the US stock market, added 0.8% on Friday, with upside driven by the moderately positive outcome of the stress test of European banks. All of the sectors included in the index reaped gains, with the rally led by industrials (up 2.0%). Bullishness on the US market has spilled over to Asian equity markets, with the Nikkei 225 index gaining 0.9%, as investor sentiment has improved on the release of upbeat data showing economic growth in South Korea in 2Q. Commodity markets look fairly strong, with base metal prices staying at relatively comfortable levels, despite the absence of a single trend in the sector. WTI oil contracts are gaining in value, trading at around USD 79 per barrel. Today we expect the release of home sales numbers in the US (at 6:00 pm Moscow time) and Spain (11:00 am Moscow time). We view this morning’s news as conducive for Russian trading, as investors may try to price in news on the conducted stress tests at the opening, thereby triggering upside in equity benchmarks. Russian banking shares could emerge as standout gainers, in our view.