Daily Review. 3rd November, 2009

Domestic equities posted gains Monday, clawing back some of last week’s losses, with the MICEX Index advancing 2.4% on the back of a favorable external news flow.

The list of advancers was topped by recent laggards, steel makers, with MMK surging 4.9%, NLMK soaring 4.7% and Severstal climbing 3%. Banking stocks, despite gradual weakening of the national currency, moved higher along with the market, as Sberbank gained 2.9% and Bank VTB grew 1.9%. O&G plays, except for Gazprom (up 2.9%), slightly underperformed, was Lukoil edged up 0.7% and Rosneft ended 1.6% higher. Rostelecom prefs, up 5.3%, remained in high demand among investors ahead of the reorganization in the telecom sector.

US benchmarks closed in positive territory on Monday, with support coming from the overall positive macroeconomic news flow. The S&P 500 Index added 0.6%, with consumer and commodity stocks leading the outperformers. Asian exchanges are mixed this morning, as investors are concerned that more state stimulus measures will be cancelled after another cash rate increase by the Reserve Bank of Australia. Prices climbed on commodity markets Monday, as WTI oil contracts rose above USD 78/bbl and gold hit another record.

According to our estimates, Tuesday morning's news flow looks moderately negative for the Russian stock market and we expect a modest correction in most liquid names at the open. O&G and precious metal stocks will likely see the strongest demand.