Daily Review. 10th July, 2008

Russian equities kicked off Tuesday to the upside on the heels of an upswing in US stock indices and Bernanke’s statements support could be provided to financial markets. Be that as it may, weakness on commodity exchanges and the overall wary risk exposure of global investors allowed Russian indices to lock in gains intraday, with the RTS Index inching up 0.18% and the MICEX Index slipping 0.56%. O&G stories led the decliners among blue-chip names amid a downswing on global energy markets, as Lukoil plunged 1.8%, Gazprom dipped 1.2% and Rosneft lost 1.9%. Steel issuers remained on the sidelines with fractional fluctuations, with Severstal falling 0.4%, MMK advancing 0.3% and NLMK shedding 0.7%. Norilsk Nickel, off 3.4%, extended its losses against the backdrop of corporate squabbling. As predicted, financial names outperformed, with Sberbank climbing 1.4% and VTB edging up 0.2%. The heaviest casualty was Razgulyai, down 11.2%, after it announced the placement price at a big discount to the current stock prices on the market.The bears were back on the US stock market Wednesday on expectations the American economy would slow down substantially in Q4 2008. The S&P 500 Index pulled back over 2%, with financial companies again leading the losers. Notwithstanding a sell-off in US trading and slower growth of China’s exports, Asian benchmarks are trading mainly in the black this morning. Commodity markets stabilized and oil futures are hovering around USD 136-137 a barrel. Based on our estimates, today’s morning news flow is downbeat for the Russian market and we expect most liquid names to open to the downside. Financial plays could take a drop after Wednesday’s uptick. Oil and gas plays will most likely trade in synch with the market today. Abundant supply from former UES shareholders will continue to put pressure on utility stocks. Today Norilsk Nickel looks set to outperform on the back of rising global nickel prices.