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2 Dec, 2008 18:26

Market Watch December 2: The gift horse

Market Watch December 2:  The gift horse

Russian stocks shrugged off some ominous early sentiment, despite little lead from oil and commodities, and with a possible Rouble devaluation hanging over banks and retailers. The RTS added another stoppage to its recent collection.

After Wall Street took Ben Bernanke's words at face value, and factored in the diminishing marginal utility, not to mention possibility, of cutting U.S. rates, in the face of an economy that 'will be weak for some time' to the tune of a 7.7% fall, Asian investors didn't dream up any positivity. Indeed, they showed every sign of dreaming of getting out.  Tokyo shed 6.35% as exporters and tech stocks took yet another belting.  Hong Kong fell 4.98% as financials wilted, and Sydney fell 4.15% with resources and energy stocks lower on the back of Brent spot and Nymex future crude prices now looking up at the $50 BBL mark, and with WTI doing the same after an overnight fall just shy of 10%.

Things looked bleak for the Russian markets from the outset, and, on opening, both the RTS and Micex adopted the pike position for another dive, seeing them down 5% apiece after the first 30 minutes.  This triggered yet another trading halt on the RTS, though not the Micex, but from there buyers came back into the ring. From early afternoon both indices rose, helped by a very minor rebound in crude prices, leading to a closing result of the Micex up 2.23% at 579.91 with the RTS remaining 2.15% below the starting mark at 618.26.  Investors looking for positive thoughts should consider their emotions at about 09.30 Moscow Time in the context of the outcomes at 19.00. Things could have been worse.

Crude prices began the day where they left last night in the U.S. – heading south with the sort of momentum which has helmeted heroes in war movies screaming ‘incoming!’ before they dive into the slit trench. $45/BBL was the obvious next stop en route to a future in which gloomier analysts envisage free steak knives, or maybe a car, with every barrel purchased.  But it wasn’t to be and after breaking under the $50 BBL mark nobody seemed inclined to push them too much lower.  Brent spent most of the day just over a $46 BBL floor with Nymex for January and WTI spot prices holding above $48.  For the days trade in Moscow that meant a mixed bag for oil stocks, with Surgutneftegaz (up 6.6% on the Micex at close) inexplicably getting surprising traction out of the day, while GazpromNeft (up 0.74%) also saw some upside, leaving Rosneft (down 1.78%) and Lukoil (down 0.16%) to reflect the fact that crude prices were actually down.  Also rising were gas producers Gazprom (up 2.08%) and Novatek (up 2.61%). 

Base metal prices provided no more fundamental reason for enthusiasm than oil, with copper, nickel and zinc all under the blowtorch.  Norilsk Nickel (down 4.91%) faithfully followed in step, while Polymetal (down 1.87%) gained nothing from the rebound in silver prices, as Polyus Gold (up 2.60%) did from J.M Keynes ‘barbaric relic’ bouncing after a selloff, the like of which gives gold consipracists food for thought.  The yo-yo continued for steelmakers NLMK (up 10.59%) and MMK (up 6.52%), albeit with diminishing momentum, while Severstal (up 0.4%) took a more measured approach and coalminer, Raspadskaya (up 6.88%) scrubbed up nicely.

Continued pressure on the Russian Rouble, and another raft of employee culls by their global peers saw differing outcomes for the big two state owned banks, VTB (up 2.66% on the Micex at close) and Sberbank (down 0.63%).  Smaller banks, Bank Moskvy (up 1.28%) and Bank Vozrozhdenie (down 0.5%) behaved similarly, to leave Rosbank (down 12.32%) following up Mondays walk on water behaviour with a step on a rake.

Retailers Sedmoi Kontinent (down 5.02%) and Magnit (down 2.54%) eased despite the release of data showing that Russians are spending up while expecting the Rouble to lose value. Pharmacy 36.6 (down 2.64%) was similarly lower despite unveiling a 3Q 2008 Net Profit, in the face of almost every analyst in town expecting further losses, as was cosmetics maker Kalina (down 1.38%).  Beverage, dairy and baby food maker Wimm Bill Dann (up 9.21%) got a kick out of something, while Lebedyansky (down 0.95 %) needed something stronger, and agricultural commodity play Razgulay (down 3.21 %) gained nothing from its call for the government to buy 5% of this years grain crop.

The telecommunications world saw regional players CenterTelecom (up 0.60%), Volga Telecom (up 2.01%), Dalsviyaz (up 1.05%), SouthernTelecom (up 4.60%) move as a herd in the direction Uralsviyazinform (up 16.38%) was leading, with Rostelecom (up 0.83%) and MTS (up 6.93%) heading the same way.

Elsewhere property developer LSR Group (up 1.74%) saw some upside along with carmakers, Sollers (up 2.86%) and Avtovaz (up 1.57%) while truckmaker Kamaz (down 1.10 %) eased.

While the fun and games in Moscow were unfolding a broadly similar pattern unfolded in Europe with a morning selloff being replaced by an afternoon gain and a higher close.  London saw the FTSE 100 add 1.4% with resources stocks getting a kicking, while British Airways announcement that its in talks about a possible merger with Australian counterpart Qantas, saw its share price jump.  The Dax added 3.12% as Commerzbank added 7%, and the Cac40 added 2.35, with Peugot and Renault adding 9% apiece.

Across the Atlantic the release of acrid car sales figures for November, whilst enough to have some questioning how much longer GM may hold out, haven’t been enough to stop stocks from rebounding after Mondays free fall.  The thought that, after all the rate cuts, bailouts and stimulii already announced, there may be more still to come, helped the positivity in volatile trade.  At the close of trade the Dow was up 3.31% with the Nasdaq up 3.7%.

All percentage movement refer to closing prices on the Micex 

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