Market Watch 6 November: Down, down, deeper and down

Russian shares fell heavily in Thursday trade with stoppages on both the dollar denominated RTS and Ruble denominated Micex, as sliding crude prices and renewed weakness in the global prices for a range of metals combined with a renewed focus on the gloom

At the 18.00 close of trade the RTS was down 6.3% at 777.52, with the Micex down 9.62% at 700.59 when it closed at 18.45, after a heavy sell off in the extra 45 minutes. Both exchanges were halted during the day for periods of one hour after hitting the technical movement limit on the downside.

The omens for a seventh straight day of positive trade weren't favourable from the outset, with a global pull back in the wake of the U.S. Presidential election, accompanied by renewed weakness in both commodities and energy prices, as the U.S. dollar firmed again. Overnight Wall street finished 5% lower after an afternoon sell off, and that flowed through to Asian trade on Thursday where the Nikkei shed 6% with Toyota slashing its profit forecast, and the Hang Seng fell 7% as commodity and energy stocks were slashed.  This reflected falls in crude prices which see Nymex futures and the WTI spot price below $62 BBL and Brent futures under $58 BBL, and commodities again falling – particularly copper and zinc.

The crude falls couldn't help but hit Russian stocks.  Bearing the brunt were Surgutneftegaz (down 10.34% on the Micex at close) Rosneft (down 6.5%) and Lukoil (down 7%). Gazprom (down 9.8%) was also hit despite receiving approval to hike the gas transport rates by 19% from next year, with Novatek also losing 9.7%.

Mining and metals companies fared no better, however, with Norilsk Nickel losing 10%, Severstal down 12.5%, and MMK limiting its loss to 5.7% after announcing it would suspend the bulk of its 2009 investment programme and had already shed about 1300 jobs. A sliding gold price saw Polyus Gold hammered by 12%, with Polymetal (down 9.7%) not getting any more traction off industrial metals.

In the banking sector Sberbank lost 9% with VTB down 8.8%.  The power generation sector was hit across the board with RusHydro down 10.6%, although something enabled Moscow power generator MOESK to defy gravity with a 6% gain. Another sector to feel investor wrath was telecoms where MTS fell 14%.  Automakers Sollers (down 13.5%) and Kamaz (down 3.9%) fared no better, and retailer Magnit was, all things considered, rolling in rose petals in limiting the fall to a relatively benign 3.6%.

Investors wishing to take their eyes off the carnage in Moscow wouldn’t have found anything less traumatizing elsewhere, however. 

In London the start of the week rally was no than a comforting memory.  The FTSE 100 shrunk 5.7% with resources taking on an agricultural bouquet, and Man group investors needing smelling salts, despite the Bank of England taking an angle grinder to its key overnight rate in bringing them to 3% – their lowest since 1955 and the biggest cut since 1981.  Across the Channel the pursed lips of the ECB matched their counterparts with a ½ percent cut bringing Euro rates to 3.25%, with Central Banks in Denmark, Czech Republic, and Switzerland also trimming rates.  Investors remained unimpressed with the Dax down more than 6% in Frankfurt as Siemens, ThyssenKrupp, MAN. AG, Commerzbank and Deutsche Bank all recorded double digit percentage falls.  In Paris the worlds largest steelmaker ArcelorMittal fell 19% as the Cac shed more than 6%.

To round out a particularly grizzly day for investors, in New York the Dow slumped to its second consecutive near 5% fall on the back of a swathe of lowered profit forecasts, corporate earnings results, rating downgrades and poor economic data – including retail sales and employment figures.  At the close the Dow was down 4.85% to set the scene for another potentially traumatic day on the Russian markets, come Friday.

Market Watch, November 5: Russian stocks ease higher

Market Watch November 7: Moscow's mixed bag, as the global outlook darkens further