Market Watch December 1: And then depression set in

Russian stocks came under renewed downward pressure on Monday as falling crude and metals prices put the skids under local sentiment, while more clouds moved onto the radar globally, and combined to make the day a grizzly one for investors.

The Thanksgiving weekend in the U.S. – coupled as it is with the Black Friday start to the Christmas sales period – provided no great trauma, and at least the flicker of hope that Christmas sales may hold up. Most investors, however, are looking ahead to U.S. jobless figures out later this week and some sort of way forward for large American carmakers that doesn’t involve layoffs for large numbers of employees.  Asian trade kicked off on Monday with the Nikkei giving up some of last weeks gains, in anaemic trade, with profit taking seeing tech stocks and exporters down. The Hang Seng added 1.59% with investors extracting every last morsel of value from last weeks Chinese rate cut, while metals stocks got an additional present in the form of a provincial government announcing it would buy 1 million tones of base metals.  The localized effect of this was manifest in Sydney where producers of the same said base metals helped the ASX to a further 1.63% fall.

Russian investors weren’t to be taken in by any metals related sucker punch emanating from Hong Kong either. Their minds were on oil, and the news wasn’t good. After a couple of weeks of mulling an end of November production cut, OPEC said it would hold off for another couple of weeks.  The net result over the course of the day was to send the Brent spot price in Europe groveling below the $50 BBL mark, with Nymex for January hanging on for dear life just above that.  If that wasnt enough, the release of the VTB Purchasing Managers Index ,showing the worst result since September 1998, had investors reaching for smelling salts.  This set the tone for the day in Moscow, which saw both exchanges sell off sharply at the opening, then steady off, with renewed selling later in the day impacting more heavily on the Micex than the RTS.  At the close the RTS was down 4.0% at 631.84, while the Micex was down 7.21% at 567.25.

The net result in Moscow saw Rosneft (down 7.08% on the Micex at close) given a mauling despite unveiling a 3Q Net Profit of $3.47 Billion, leaving little hope for Lukoil (down 8.20%), Surgutneftegaz (down 9.52%), GazpromNeft (down 9.22%), as Gazprom (down 5.69%), Novatek (down 2.04%), Ritek (down 1.40%) limited the carnage to some degree.

Hong Kong was but a memory for European traders who watched metals prices come in for a another meltdown, with even gold and silver getting the knout. This meant Norilsk Nickel (down 9.22%) didn’t find any favour despite Rusal calling off its legal attack in the company’s share buyback.   Polyus Gold (down 2.12%) and Polymetal (down 3.74%) managed to restrict their trimmings to less than the falls in the gold and silver they produce.  After a couple of days out of the field MMK (down 16.66%), and NLMK (down 19.62%) are probably wondering if they came back too soon, leaving Severstal (down 8.20%) to shine in comparison – but only in comparison.  Elsewhere Raspadskaya (down 5.11%) could have got away lightly, with Uralkali (down 2.95%) doing better, and agricultural commodities leaving no upside for Razgulay (down 2.22%) either.

A further firming in the U.S dollar, with Treasuries being snapped up like truffles as investors catch a whiff of maybe more corporate blood in the water, saw the Rouble edge closer to the 28 to the Greenback mark.  It didn’t help Russian banking stocks at all as Sberbank (down 5.16%) and VTB (down 4.76%) bore the brunt of investor hostility, with Bank Moskvy (down 1.26%) and Bank Vozrozhdenie (down 0.86%) getting away somewhat lighter, and Rosbank (up 8.59%) managing to post one of the days few gains.

In the retail and consumer goods world things were a little more sedate if still negative. Being downmarket helped Magnit (down 0.87%) if being upmarket didn’t help Sedmoi Kontinent (down 6.36%) while Dixy (down 30%) investors can run around shrieking with just cause.  Wimm Bill Dann (down 7.28%) gave back most of its Friday gains while Lebedyansky (down 0.94%) managed to keep the downside to a minimum.  Kalina (down 1.34%) may have gained from the release of better than expected 9M 2008 results, with Pharmacy 36.6 (down 3.12%) having had worse days recently.

Sollers (down 2.24%), Avtovaz (down 6.82%), and Kamaz (down 8.71%) gained no traction on the day.  CenterTelecom (down 8.82%), Volga Telecom (down 7.47%), Dalsviyaz (down 2.17%), Southern Telecom (down 11.89) RosTelecom ( down 4.64%) and Uralsviyazinform (down 9.57%) provided nothing more pleasant than high frequency squeals.  Also squealing were investors in IT services group Armada (down 28.38%) and RusHydro (down 7.9%) .  LSR Group (down 5.62%) was also down, although rival property developer PIK Group (up 30%) provided the days other notable gain.

While Moscow investors took a pummeling, European trade was no bed of roses. London nosedived 5.19% as resources stocks received a hiding that will make their Russian counterparts either laugh giddily at having avoided, or panic stricken if they think it may come around tomorrow.  Double digit percentage losses for big banks helped to rub the Dax in it to the tune of 5.88%, and ArcelorMittal led the Cac40 to another 5.59% drubbing.

Sentiment worsened throughout the Russian and European trading day to hit a nadir with the release of U.S. manufacturing data showing the worst results since 1982.  Following on from the release of Asian, Russian, and European data possessing a bouquet described on wine labels as ‘agricultural’ investor sentiment took yet another turn for the worse as the National Bureau of Economic Research announced that the actual recession started in December 2007.  Thanks fellas – now you tell us. At the close of trade the Dow was down 7.7% with the Nasdaq down 8.95%.

All percentage movements reflect the closing prices on the Micex

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