Slump of US bourses, fall of oil prices to undermine Russian stocks

MOSCOW, Feb 6 (PRIME) -- Russian stocks will contract significantly at Tuesday’s opening as investor mood was undermined by a Monday slump of the U.S. stock indices and a continuous fall of oil prices, analysts said.

“The background prior to the opening of the Russian market is negative…Futures for the major U.S. stock indices are still falling in the morning, the Asian stock indices are suffering significant losses, and the European session’s premarket signals a 4–6% slump of the leading European stock indices at the beginning of the day,” Oleg Shagov, head of investment company Solid’s research department, said.

“We expect the Russian stock market to open with a downward gap to the level of 2,250 of the MOEX Russia Index, and suppose that the stock indicator will remain under pressure of sales due to the unfavorable external background.”

Anton Startsev, a leading analyst at investment company OLMA, said that volatility and contraction of international share prices only deepened at the beginning of the week.

“Judging by the dynamics of market indicators, traders think that a fixed 2.7% yield of U.S. 10-year treasuries is more attractive than the expected yield on shares, and the process of ‘shares growing – bonds falling’ has reversed in the U.S. due to higher volatility. This has a negative impact on investor activity at emerging markets,” Startsev said.

Vitaly Manzhos, a senior risk manager at investment company Nord Capital, said that the slump of oil prices also contributed to the negative background.

The Brent oil price slid 2.419% to U.S. $66.96 per barrel as of 9.07 a.m. Moscow time, according to the ICE exchange.

Artyom Deyev, a leading analyst at forex broker AMarkets, said that the oil prices fell following “colossal” sales at the U.S. stock market, which hurts demand for risky assets, and an increase of the U.S. dollar.

“The improved interest in the U.S. currency was a consequence of the reaction of traders to the growth of the average wage in the country, which may stimulate inflation and make the Federal Reserve System raise its rates faster than expected,” Deyev said.

Manzhos also said that the Russian market is likely to price in the worsening background early in the day. “We expect a harshly negative start of the trade with a decrease of about 1–1.5% of the MOEX Russia Index close to 2,250. The points of 2,240 and 2,230 will become the closest noticeable support, while 2,270 and 2,280 will act as resistance,” he said.

Shagov said that local investors will track news from Gazprom’s investor day in New York and the release of financial results of Magnitogorsk Iron and Steel Works (MMK) for October–December 2017.

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