Daily Review. 28th October, 2009

Domestic equities trended lower Tuesday under pressure from the external news flow, with the RTS Index sinking 3.7% and the MICEX Index declining 1.8%. Investors are cautiously assessing the consequences of the gradual rolldown in government support programs by the world’s largest economies.

O&G plays followed the market lower, as Gazprom shed 2.1%, Lukoil eased 1.1% and Rosneft declined 1.8%. Banking stocks slightly outperformed, reaping gains on optimistic expectations of CBR officials, as Sberbank eased 0.5% and Bank VTB ended 0.8% lower. Norilsk Nickel’s stocks (off 0.3%) gained support from high prices for the holding’s primary commodity groups. Steel makers led the decliners, as MMK plunged 4%, NLMK pulled back 3.9% and Severstal lost 4.1%.

US benchmarks moved further south Tuesday on fears the global economic recession will lose momentum, with the S&P 500 Index dipping 0.3%, while commodity and consumer names underperformed. Bearish trends spilled over to Asian exchanges this morning, with indices down 2%. Commodity markets remained stable, as oil futures continued to trade in the narrow band of USD 78-80 a barrel, while base metal prices remained largely unchanged.

According to our estimates, Wednesday morning's news flow looks unfavorable for the Russian stock market and the downturn in most blue chips will likely continue in early trading. External news could put the heaviest pressure on metal and banking stocks. O&G plays have a chance to slightly outperform as crude oil prices stay high. US durable goods orders and home sales for September are due out in the second half of today’s session, which could have a substantial impact on market sentiment.