Daily Review. 12th November, 2009

Domestic equities finished Wednesday with moderate losses. An upswing at the open was fed by external bullishness on the back of China’s strong economic data and as the session wore on the benchmarks grew on rebounding oil prices. However, a correction set in on the oil market near the final bell which triggered a downturn in Russian stocks. As a result, the indices landed in negative territory, with the RTS Index inching down 0.18% and the MICEX Index easing 0.50%.

O&G plays drifted lower as the oil market corrected down near the closing bell, as Gazprom dipped 1.2%, Rosneft dropped 0.2% and Lukoil edged down 0.6%. As for financials, Bank VTB led the underperformers, shedding 2.9%, while Sberbank ended 0.4% lower. Steel makers largely outperformed, as MMK was up 0.9%, NLMK advanced 0.7% and Severstal added 0.9%. MRSK Holding securities surged 4.6% on reports the utility’s shares could be added to the MSCI Russia Index.

On Wednesday US benchmarks closed higher with gains averaging 0.5%. The market was cheered by impressive industrial production numbers out of China and also US Fed statements which could suggest the US Fed is prepared to keep the federal funds rate close to zero for a long time. Asian exchanges are moving higher this morning on better-than-expected labor market data from Australia. Crude prices nearly won back yesterday's losses on a weaker dollar. Against this backdrop, gold prices rose to new highs.

We think Thursday morning’s news flow looks favorable for the Russian equity market. If crude continues to climb, this will lend support to both O&G plays and the market as a whole. With gold on the move, gold miners could outperform today. EU manufacturing numbers, US jobless claims and petroleum stockpiles could impact market sentiment in today’s session.