Market Watch November 20: Russian stocks wilt as global outlook darkens further

The RTS and Micex closed lower with crude and commodity prices wilting throughout the day, as global sentiment remained nothing short of bleak. The only upside came late in the day on the Micex when a minor rally limited losses which had earlier triggere

Following on from Wednesdays late afternoon wave of selling in the U.S. which pushed the Dow to a 5% slump, with banks in particular bearing the brunt of renewed concern about the global economy, Asian traders provided no floor.  Tokyo lost 6.89% with the Nikkei posting its biggest loss for a month as exporters tanked on the outlook for the global economy, after Japan posted its biggest trade deficit in 7 years, and financials wilted as fears mounted once again for major U.S. banks.  Hong Kong lost more than 4% as investors turned to cash, and Sydney lost 4.32% with financials and resources stocks taking a beating.

None of those boded well for the start of the trading day in Moscow.  Within moments of opening both the RTS and Micex were sharply lower with the Micex calling a trading halt at 11.00 Moscow time and the RTS calling its halt at 13.20.  Both were triggered by the index falling more than 5% both lasted an hour.  Things steadied off at last after trade resumed, although there wasn’t much improvement until late in the day when, and then only on the Micex, stocks started to rally a little.  At the close the RTS was down 7.38% at 561.14, with the Micex closing 45 minutes later at 533.70 having come away from a day where it was down by 8% at some points with only a 4.38% fall.

Crude prices settled further in the wake of stronger than expected U.S. inventory data, with Brent spot prices clearly below $50BBL and heading towards $45 and with the WTI spot price also under $50 and Nymex futures sliding lower towards that mark. That saw Surgutneftegaz (down 6.54%) and GazpromNeft (down 11.72%) sharply lower, but Rosneft (down 1.79%) and Lukoil (down 1.72%) managing to limit losses, with reports that Lukoil had taken part in talks about buying into Spanish energy major Repsol possibly helping its cause. Gazprom was down 2.86% for the day, as the prospect of yet another cut off to Ukraine loomed in the coming months, with Novatek wearing a 14.85% belting.

A firming U.S. dollar saw most commodity prices also heading south with metals down on greater fears of a long term global slowdown hitting longer term demand.  The major exception was gold which continued to firm as investor again begin to seek safety maybe sensing that something somewhere isn’t far from crashing.  That saw Polymetal take a 7.29% beating, with Norilsk Nickel keeping the losses to relatively reasonable 2.66% while suggesting that the Russian State could buy out Rusal’s 25% stake in it.  Polyus Gold (down 7.38%) continued to move in the opposite direction to the precious metal it produces, despite confirming it was not planning on cutting back on production next year.  Coalminer, Raspadskaya (down 20.63%) had a day to put behind it and steelmakers NLMK (down 12.26%), Severstal (down 8.03%) and MMK (10.71%) weren’t much better.  Agricultural commodity producer, Razgulay (down 12.55%), fell with grain prices. 

Globally banks continued to wallow on both the stubborn refusal of interbank rates to come down to the levels at which central banks would like to see them, concern that a major global downturn is going to do a little more than crimp profitability, and the faintest suspicion that maybe there’s still some big write offs out there waiting to surface.  In Moscow that saw State owned Sberbank (down 2.21%) and VTB (down 2.55%) manage to keep the daily share price mauling to an almost pleasant level – courtesy of a late afternoon buying spree.  Bank Moskvy (down 4.47%) and Bank Vozrozhdenie (down 5.05%) fared a little worse, while Rosbank (down 15.15%) should think about offerings to the Gods.

Retailer Sedmoi Kontinent (down 20.63%) had another nightmare day, while down market rival, Magnit (down 3.71%), held up reasonably fine. Drinks and baby food producer Wimm Bill Dann lost 7.41% while Lebedyansky got away with a 1.38% trimming.  Pharmaceutical Veropharm lost 10.28% while beauty products manufacturer, Kalina, wore a less than glowing 8.69% bath.

Elsewhere telecoms Dalzvyaz  (down 6.48%) Sibirtelecom (down 5.0%) Uralsviyazinform (down 9.05%) and Volga Telecom (down 1.33%) came back to the field after some recent gains and carmakers Avtovaz (down 9.19%) and Sollers (down 23.5%) headed downhill.

Thursday trade in Europe wasn’t a bed of roses either.  In London the FTSE 100 lost 3.26% with insurers bearing the brunt of investor hostility, but with resources and energy stocks also lower, and with banks getting some upside.  Not so lucky were German banks which helped the Dax to a 3.03% decline, and in Paris the Cac 40 shed 3.4% with steelmaker ArcelorMittal down.  Helping sentiment in Europe was the Central Bank of Switzerland’s surprise announcement of a 100 basis point cut in its key rate bring it to 1%.

The gloom continued across the Atlantic to Wall Street where before the start of the days play sentiment, already less than sweet, soured a little more on the release of the worst unemployment data in 16 years.  With crude down – Brent and WTI spot prices by now below $50 BBL – the prospect of deflation mounting, and bond yields and Treasuries indicating more pain in financing things were looking seriously ugly.  The mood lightened for a while on reports that a bail out plan had been agreed for carmakers, and the Dow, along with share prices of GM and Ford, surged into positive territory.  Later it transpired that carmakers had been told to come back next month with a plan before they would get the cash – at which point GM may be coming back on a bier – and stocks headed back to the depths from which they had briefly risen.  Some upside came for Citigroup when Saudi Prince Prince Alwaleed bin Talal declared that he would increase his stake in the company, although it still fell heavily on the day.  The Thursday close saw the Dow and the Nasdaq both down more than 5% with the selling turning into an avalanche towards the close, and setting the scene for another tough day come Friday.

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