Low oil prices, negative environment to drag Russian stocks down

MOSCOW, Nov 2 (PRIME) – An unfavorable external environment and low oil prices are likely to drag Russian stocks down at the opening of Wednesday’s trading session, analysts said.

“The external background prior to the start of trade in Russia on Wednesday looks negative. China’s CSI 300 stock index is falling 0.56%, while Japan’s Nikkei 225 is losing more than 1.8%. Futures for the U.S. S&P 500 are contracting by 0.35%,” Timur Nigmatullin, an analyst at investment company Finam, said.

“In general, risky assets in the world are under pressure from two factors: the U.S. presidential election…and publication of the results of the U.S. Federal Reserve System’s (Fed) meeting.”

Nigmatullin said that the Russian stock market may open with a more than 0.5% decrease of the MICEX index.

Anton Startsev, a senior analyst at investment company Olma, said that political uncertainty in the U.S. has worsened after recent polls showed a switch in public favor for Donald Trump, hurting the risk appetite.

At the same time, the American Petroleum Institute said that the U.S. crude reserves increased by 9.3 million barrels in a week, which is a negative factor for oil prices, Startsev said.

The Brent oil price has lost 0.66% to U.S. $47.82 per barrel as of 9.21 a.m. Moscow time.

“Today a downward correction of the RTS index is possible at the beginning of the day under pressure from the external background,” Startsev added.

Vitaly Manzhos, a senior analyst at Bank Obrazovanie, said that the Russian stock market is very likely to price in the unfavorable morning external background during the first half of Wednesday’s trade, and will remain under influence of oil prices.

“We expect the market to open with a significant decrease of about 0.5 of the MICEX index in a 1,985–1,990 range. The levels of 1,980 and 1,970 will become support, while 2,000 and 2,010 will act as resistance,” Manzhos said.

Investors will track the results of the Fed’s meeting, Manzhos said. Nigmatullin said that the results will be published at 9.00 p.m. Moscow time and CME Group’s FedWatch shows a 7.2% possibility of the key rate increase, while in December the probability is 73.6%.

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