Daily Review. 29th October, 2009

As global investors turned bearish Wednesday the Russian stock market was hit by a heavy wave of sell-offs, with the RTS Index pulling back 3.7% and the MICEX Index diving 6%.

O&G and banking plays traded in stride with the market, with Gazprom plunging 5.9%, Lukoil plummeting 6%, Rosneft diving 5.3%, Sberbank shrinking 5.5% and Bank VTB declining 6.6%. Steel-making issuers lagged behind the market under pressure from the downturn in steel names, as MMK saw 7.6% sliced off its market cap, NLMK skidded 10.1% and Severstal tumbled 8%. Telecoms continued to outperform, with Rostelecom dipping 0.7% and Uralsvyazinform losing 4.8%.

Global equities were engulfed in a sell-off on Wednesday, with additional downward pressure on US exchanges coming from weaker-than-expected new home sales in September. The S&P 500 Index sank 2%, while financials and commodity plays led the market lower. Asian equities are also trading in negative territory this morning, with the benchmarks down as much as 2.5%. A weaker dollar coupled with concerns that the pace of economic recovery is losing momentum exerted an adverse impact on commodities, with WTI futures retreating to USD 77/bbl amid equal losses in primary groups of non-ferrous metals.

According to our estimates, Thursday morning's news flow looks essentially neutral for the Russian market and we expect stock prices to stabilize at the open. During the trading session liquid names could make an attempt to recoup losses of the previous sessions, but bullish trends need external support (US GDP data for 3Q is due out later today). O&G plays and banking names stand a good chance of outperforming today.