Market Watch November 18: A mystery rebound from the depths
With Wall Street closing overnight a further 2% closer to that point which at which parents tell their little children they should go to bed for fear of letting them become psychologically scarred, Asian investors weren’t in any mood for lightening the mood. The Nikkei tumbled another 2.2% with renewed concern about the global economy, and with the rancid halibut aspect of banking stocks percolating again to the surface in the wake of Citibank’s massive job cuts. Banks also helped Hong Kong ease another 4% into the red with HSBC’s target price being cut by Goldman Sachs, and in Sydney the ASX also saw financials down in losing 3.4% but more disturbingly for Russian investors, metals and resources were down on weakening prices, with oil continuing to wallow in the low $50 BBL region.
Yea verily must Russian traders and investors have felt unease when buttering up for Tuesday. With Asia and the U.S. down, and commodities and oil likewise, the thought that banks were taking on the days horror movie role, coupled with this weeks spike in Moscow Interbank rates, could easily have triggered an urge to bear hug a cactus instead. But as events transpired, after the initial shock of starting the day and being down 5% before lunchtime wore off – courtesy of another set of trading halts – the afternoon session saw something relatively miraculous: A rebound. And at the end of the days play the RTS had come back from being as much as 6% lower to keep a toe hold above 600 – 601.76 to be precise – with a loss of 0.63%, and 45 minutes later the Micex closed having made its way back from more than 7% down to a gain – that’s right, a gain – of 3.26% at 579.17. It was sort of like being put in a cage with a lion and having it come and purr by your side for no reason whatsoever – part of you wants to cry with relief, part of you wants to cry because nothing this beautiful will ever happen to you again, and not a part of you has any idea what actually has happened.
Oil continued to drift lower through the day, despite the best attempts of oil tanker hijackers off the coast of Somalia to add some upside, and further talk that OPEC will angle grind its knuckles with production cuts unless thee world stops grinding its knuckles with lower prices. In the end they were no match for reports that U.S. crude inventories are set for another weekly gain, with Nymex futures and WTI spot below $55 BBL and the Brent spot below $50 BBL. Despite this Surgutneftegaz (up12.11% on the Micex at close) got a boost from an upgrade by Citigroup to ‘buy’, which gave a boost to other oil stocks with Rosneft (up 0.81%), Lukoil (up 3.22%) and GazpromNeft (up 4.37%) also gaining, and Gazprom (up 1.25%) and Novatek (down 1.36%) breaking both ways.
Base metal prices gained during the European trading day with Zinc, Copper and Nickel up. That helped Norilsk Nickel (up 1.30%) and Polymetal (up 6.70%), with Polyus Gold (up 3.66%) also gaining. Amongst steelmakers Severstal was down 5.52% on lowering its full year EBITDA forecast, despite unveiling better than expected 9M 2008 results. Also down was MMK, by 3.86%, with NLMK adding 6.56% after its announcement that it had terminated its agreement to buy U.S. steelmaker, John Maneely. Coal miner, Raspadskaya, lost 2.85% on the Micex.
Bigger state owned Russian bank stocks had a positive day despite – or perhaps because of – global sentiment and the local interbank rate spike. Sberbank gained 7.13%, with VTB adding 3.91%. Smaller counterparts Bank Moskvy (down 0.70%) and Bank Vozrozhdenie (down 0.16%) held up reasonably, but Rosbank closed 7.48% lower. Amongst telecoms, Uralsviyazinform (up 0.98%), Dalsvyaz (up 1.05%), and SibirTelecom (up 2.64%) got a positive out of the day with Volga Telecom (down 3.2%) languishing. Amongst automakers Kamaz (down 3.44%) needed to keep trucking with Avtovaz (up 2.78%) and Sollers (up 0.49%) revving marginal gains on the day.
In the retail, consumer goods, and pharmaceuticals world Sedmoi Kontinent (down 3.07%) eased while Magnit (up 0.04%) held on, with Wimm Bill Dann (up 9.75%) managing a strong gain while Lebedyansky(down 0.72%) eased, and Kalina (down 8.68%) took a beating while Veropharm (up 2.84%) took a positive from the day.
While this unfolded in Russia, European trade panned out similarly with morning falls being generally outweighed by afternoon rebounds. In London the FTSE 100 added 1.85% with insurers up and banking and resources generally lower. The Dax added 0.49% with Metro higher and banks lower, and the Cac 40 added with Total and Axa higher and banks again taking a bath in Paris.
A volatile session in New York ended with the Dow making a gain of 1.86% for the day after climbing sharply in the last 30 minutes, in the wake of testimony from Ben Bernanke and Hank Paulson before the House Financial Services Committee about the $700 Billion financial relief package. Also adding to the upside was a better than expected 4Q posting from Hewlett-Packard. The Nasdaq managed to gain 0.08%.