Daily Review. 21st October, 2009

Domestic equities kicked off to the upside Tuesday on the heels of bullish trends taking shape on global stock exchanges. However, in the second half of the session worse-than-expected economic data from the US dragged down the market and the benchmarks ended the session mixed, with the RTS Index advancing 0.89% and the MICEX Index slipping 0.26%.

O&G plays, except for Gazprom (up 0.3%), traded in negative territory as oil prices began to retreat near the final bell, as Rosneft dropped 1.4% and Lukoil dipped 1.5%. Domestic banking names moved lower along with the market, with Sberbank inching down 0.3% and Bank VTB falling 1.2%. Steel makers largely outperformed, as MMK was down 0.3%, NLMK advanced 0.9% and Severstal added 0.7%.

US trading was largely bearish Tuesday due to lower-than-expected new home starts in the country. The Dow Jones Industrial Average decreased 0.5%. Against this backdrop and with commodity markets experiencing a downturn Asian indices are also seeing losses this morning. Crude prices corrected down after more than a week of gains and on a stronger dollar. Brent contracts are currently trading around USD 76.80 per barrel.

According to our estimates, Wednesday morning's news flow looks unfavorable for the Russian stock market. We expect most liquid names to open lower. A retreat in crude futures is likely to put pressure on the market and O&G plays in particular. The release of 1H 2009 IFRS financials will be an important event for Bank VTB stocks. US oil inventories, due out at 6.30 pm Moscow time today, could impact oil market sentiment.