Market buzz: No pain, but no gains

Russian markets are expected to cool on Monda after a Friday rally
The rally on Russian markets that began on Friday is expected to cool on Monday. That is on the back of the oil market starting to soften and US floors expected to open in the red.

“There’s no important news expected to come out today, that’s why I think, stock indices will correct after Friday’s growth,” Ilya Rachenkov, an analyst of Investcafe forecasts. This is basically because oil has started to go down, as well as the US market is expected to start a weak trading session today, he believes. “Futures for the S&P Index 500 are demonstrating a decline of 0.1%,” Rachenkov explains one of the key reasons for his pessimism.

Anyway, analysts basically point to a growing bubble in the oil market, saying there is a “fear premium” of around $10/bbl. Oil reached its new nine-month high on both Iran concerns and signs of US economy improving. And “in the last seven years we’ve seen such high price only twice – after a war in Libya started in April 2011 and prior to the crisis of 2008,” reminds Vitaly Mikhalchuk of Investcafe. WTI is currently standing close to $110/bbl and Brent being traded slightly beyond $125/bbl.

Last week Iran said it would stop its oil supplies to the Great Britain and France, with the Iranian agency Fars reporting tankers heading to Greece left the port of the Islamic Republic of Iran empty. However, the managing director at Iranian Oil Terminals Co, Pirouz Mousavi, denied any speculation about oil delivery disruptions to Greece talking to Reuters on Monday.

On a more positive note, strong oil should turn investors closer to Russian oil companies, Mikhalchuk continues. The shares of such high yield energy companies as Gazprom, Lukoil, Surgutneftegaz and Tatneft will become increasingly attractive, agrees Alexandra Lozovaya, head of the analytical department at Vector Securities Investment Company. Energy sector will be a more risky option short term, while longer term it is likely to outperform the market, Investcafe analyst adds. It will be growing on the back of “privatization initiatives, rising tariffs as well as Government investment into the sector”, Lozovaya concludes.

The coming week will also bring a lot of the US statistics to the market, which will make it increasingly volatile, believes Lozovaya. Among the macro data from the States there will be the Price Index for housing Case-Shiller and the second estimation of the country’s 4Q 2011 GDP, which is expected to remain at the initial evaluation of 2.8% year-on-year.

And the “Greek factor” should also be diminishing, after the EU leaders agreed on the second lifeline to the country.

The Russian markets ignored a so-called “Friday factor” in the end of last week and closed the trading session on an upbeat note. The RTS jumped 5% to 1,722.3 points and the MICEX increased 3.67% to reach 1, 594.55. This was driven by the positive news from the West, as well as rising oil.

Germany has demonstrated another 1.3 points growth of its business confidence index – the fourth consecutive positive change. US-wise, the number of jobless claims in the country remained flat last week, with the sales in the secondary housing market adding 4.3% month-to-month, explains Mikhalchuk.