Moscow Exchange index falls below 2100p amid strengthening ruble

After a positive start to trading on Monday, the Russian stock market turned down as part of profit-taking by players, despite positive signals from external markets (Brent oil exceeded $103 per barrel); The Moscow Exchange index fell back below the 2,100-point mark on the back of the strengthening ruble.

By 13:30 Moscow time, the Moscow Exchange index amounted to 2089.46 points (-1%, the morning maximum – 2127.96 points), the RTS index rose to 1166.38 points (+0.4%); the prices of the majority of „blue chips” on the „Moscow Stock Exchange” fell by 2.9%.

The dollar sank to 56.41 rubles (-0.78 rubles).

Shares of Norilsk Nickel (-2.9%), Inter RAO (-2.3%), AFK Sistema (-2%), LUKOIL (-1.9%), Rosneft ( -1.8%), NLMK (-1.7%), Severstal (-1.7%), ALROSA (-1.6%), TCS Group receipts (-1.6%) , NOVATEK (-1.4%), RusHydro (-1.4%), MTS (-1.3%), Tatneft (-1%), Sberbank (-0.9% and -1% of preferred shares), Surgutneftegaz (-0.9% and -1.7% of preferred shares), MMK (-0.9%), Gazprom (-0.6%) , UC Rusal (-0.6%), Gazprom Neft (-0.4%), VTB (-0.4%), Moscow Exchange (-0.3%), Magnit (-0 ,one%).

OZON receipts (+5.3%), shares of Polymetal (+1.8%), Yandex (+0.9%), Aeroflot (+0.1%) rose in price.

Shares of FGC UES (+1%, to 9,214 kopecks) grew up on the news about the merger of the parent company, PJSC Rosseti, with FGC, as well as the news about the buyout price from those who disagree with the merger.

The buyout price from those who do not agree with the reorganization of Rosseti (-2.3%, to 0.6124 rubles) will be 0.6058 rubles. per ordinary share and 1,273 rubles. for prefs (prefs sank 3% to 1.21 rubles). The buyout price for FGC shares is set at 9.04 kopecks. An extraordinary meeting of shareholders of FGC on this issue will be held on September 14 (the date of closing the register – August 17), Rosseti – on September 16 (the register will close on August 19).

According to Alfa-Bank strategist John Walsh, on Monday the growth of global stock markets continues, but the Russian market has taken a break. Europeans, experiencing an energy crisis and the threat of a recession, are concerned about whether the Russian Federation will resume gas pumping through Nord Stream 1 on July 21. Italy is on the brink of a political crisis if Prime Minister Mario Draghi resigns. This uncertainty will put pressure on the ECB at Thursday’s meeting, when the regulator is likely to start a monetary tightening cycle with a 25bp rate hike. Although, according to analysts, this step of increase may not be enough and the ECB is lagging behind the global trend, however, against the backdrop of an impending recession, Christine Lagarde cannot afford to be as tough as the Fed. This may continue to put pressure on the euro,

European Commission confirms plans to ban gold imports from Russia
July 15, 2022
European Commission confirms plans to ban gold imports from Russia
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Toward the end of the week, the EU will present the seventh package of sanctions against the Russian Federation, which provides for a ban on the import of Russian gold. In addition, the EU is likely to clarify its position on trade in Russian food and agricultural products, as well as clarify its position on the transport of goods between the Russian Federation and the Kaliningrad region, Volsh notes.

According to Igor Dodonov, an analyst at FG Finam, investors on world markets reacted positively to the good statistical data published on Friday on the US consumer sector, which indicate that it is still premature to talk about a recession in the US economy. At the same time, a slight decrease in the inflation expectations indicator as part of a study of consumer sentiment by the University of Michigan, along with comments from a number of Fed representatives, eased fears that the regulator at a meeting next week would immediately raise the key rate by 1 percentage point. Thus, according to the FedWatch tool from CME Group, market participants are currently assessing the chances of the Fed rate hike by 1 percentage point. at the July meeting of the regulator only in 29%,

This week, global investors are waiting for the meeting of the ECB, which for the first time in 11 years may raise the key rate (by 0.25 percentage points). Of interest will also be the comments of the leadership of the central bank on further steps in terms of normalizing monetary policy.

The Moscow Exchange index rolled back to minus on the back of a new strengthening of the ruble. This week, Russian investors will continue to evaluate the news of geopolitics, as well as wait for reports from the meeting of the EU foreign ministers, which will discuss, among other things, further sanctions against the Russian Federation. Earlier, European politicians said that as early as this week the EU may adopt the next, seventh package of anti-Russian sanctions, which, in particular, will include a ban on the purchase of Russian gold.

On the daily chart, the Moscow Exchange index rebounded from the support level of 2070 points. We can expect the rebound to continue, with the immediate target being the mark of 2190 points, then the 50-day moving average in the region of 2310 points, Dodonov believes.

According to Veles Capital analyst Elena Kozhukhova, corporate news and external background support the stock market.

The EU on Monday will discuss new sanctions against Russia, including a ban on gold imports, which was previously introduced by the G7 countries. Oil is growing mainly on technical factors, Brent and WTI prices in the coming days may rise to $107.5 and $104 per barrel, respectively (middle Bollinger bands on the daily charts), after which investors may return to short-term sales amid continued risks of reduced demand for oil. In the meantime, futures are supported by a corrective weakening of the dollar, as well as the lack of progress in Biden’s talks with Saudi Arabia regarding the increase in oil production capacity.

For the RTS index, resistance was the mark of 1160 points, after it is overcome, we can expect a rebound to at least 1200 points. For the Moscow Exchange index, resistance is the line of 2150 points, the achievement of which is constrained by the strengthening of the ruble.

According to Alexei Antonov, head of the investment consulting department at Alor Broker, the downward trend in the Russian stock market has not yet been broken.

In many ways, the growth at the end of last week was a consequence of the closing of short positions and the rebound of oil. Joe Biden’s visit to Saudi Arabia did not lead to any new agreements on increasing oil production, and the Saudis do not have the capacity to sharply increase production. On Monday, Brent oil continues its smooth ascent, denoting a fairly wide corridor with the boundaries of $98-115 per barrel. The risk for a further rise in oil prices is the worsening situation with the incidence of coronavirus in China.

Demand for the shares of the bank „Saint-Petersburg” remains after the news that the supervisory board recommended to distribute part of the profit of the first half of the year in the form of dividends. Even after Friday’s rise, the dividend yield of the bank’s shares was 15% per annum, so on Monday the growth of securities continued.

In general, the downtrend on the Russian stock market remains in force: to break it, the Moscow Exchange index needs to gain a foothold above 2200 points. The ruble is getting more expensive as the tax period approaches, Antonov notes.

In the world
In the US on Friday stock indices rose by 1.8-2.2% on positive data on retail sales, which eased the risks of a possible economic recession.

US retail sales rose 1% in June from May, the country’s Commerce Department said. Analysts had expected a less significant rise – by 0.9%, writes Bloomberg. In May, retail sales fell by 0.1%, and not by 0.3% as previously announced.

Retail sales account for about half of all consumer spending, providing, in turn, 70% of US GDP. Therefore, the dynamics of the indicator may indicate the appearance of signs of a recession in the economy.

In addition, the consumer confidence index of the University of Michigan in July rose to 51.1 points from the June level of 50 points, which was the lowest during the calculations. The average analysts’ forecast assumed that the indicator would remain at the level of 50 points, while experts polled by Trading Economics, on average, predicted a decline to 49.9 points.

In Asia, stock indices also rose on Monday (Japan has a day off – Day of the Sea, South Korean Kospi rose by 1.9%, China’s Shanghai Composite – by 1.6%, Hong Kong’s Hang Seng added 2.7%), „plus” Europe ( FTSE, DAX, CAC40 indices are growing by 1.3-1.4%) and American stock futures (the contract for the S&P500 index is growing by 0.9%).

Risk appetite was also boosted by Chinese media reports that China’s central bank has ample monetary policy room and enough tools to support the economic recovery.

The People’s Bank of China (PBOC, the country’s central bank) provided banks with 12 billion yuan in seven-day reverse repo operations. The rate on these transactions remained at the level of 2.1% per annum.

In the oil market, prices are also rising on Monday, traders are evaluating the results of US President Joe Biden’s visit to Saudi Arabia, as well as signals regarding the balance of supply and demand in the world market.

The cost of September Brent futures by 13:30 Moscow time was $103.59 per barrel (+2.4% and +2.1% on Friday), the August price of WTI was $99.59 per barrel (+2.1% and +1.9% on Friday).

Biden said following the visit that he had discussed with the leadership of Saudi Arabia the issue of oil supplies to the world market. „We had a positive discussion on global energy security and reasonable oil supply mechanisms to support economic growth in the world,” he said. The politician also added that he expects from Saudi Arabia „further steps in the coming weeks.”

As a result of the past week, Brent fell by 5.5%, WTI – by 6.9%. Oil prices have been falling since mid-June on fears of a recession in the global economy and, accordingly, a decrease in demand for fuel.

Libya, meanwhile, expects to increase oil exports. Prime Minister Abdul Hamid Dbeiba said on Sunday during a meeting with the new leadership of the state-owned National Oil Corp. that work on fields where production was suspended is being resumed and export ports are resuming their work.

In Russia
In the „second tier” on the Moscow Exchange, the leaders of the rollback were „preferred shares” of PJSC „Rosseti Lenenergo” (-7.9%), shares of PJSC „Rosseti Center and Volga Region” (-5.2%), PJSC „Far Eastern Shipping Company” ” (-3.4%), PJSC „Vladimir Chemical Plant” (-2.6%).

The shares of PJSC Zvezda (St. Petersburg) (+20.7%), Bank St. Petersburg (+6.9%, to 84.14 rubles), PJSC SPB Exchange (+6.4%) ), receipts of Etalon (+4.6%), Irkut (+4.6%), GDR X5 Retail (+4.3%).

Sales of X5 Retail Group, the largest retailer in Russia (Pyaterochka, Perekrestok stores, etc.), in the II quarter of 2022 increased by 18.6% compared to the indicator for the II quarter of 2021, to 647.276 billion rubles, reported company. Compared to the dynamics of the first quarter (19%), growth slowed down somewhat.

The total volume of trading in shares based on the Moscow Exchange index by 13:30 amounted to 11.7 billion rubles (of which 2.8 billion rubles fell on ordinary shares of Sberbank, 2.09 billion rubles on the securities of Gazprom and 846.52 million rubles on shares „LUKOIL”).

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