Stocks to fall at opening on global tensions, Fed’s decision

MOSCOW, Jan 27 (PRIME) -- The Russian stock market will start the main trading session on Thursday lower on the pressure of geopolitical concerns, while the signals sent by the U.S. Federal Reserve System (Fed) at its Wednesday meeting only add fuel to the fire, analysts said.

“So many geopolitical ‘knots’ have been tied that untying them quickly is impossible. Now is not the time for the bulls. Any ultimatum made by the U.S. or Russia will be met with a new ultimatum. Now Moscow is dissatisfied with Washington’s response to the security guarantee proposals,” Andrei Vernikov, head of the investment analysis and education department at investment company Univer Capital, said.

“The market will price in the positive fundamental factors, like the highest oil price of the past 7 years later.”

Global geopolitical tensions are coupled with worries that toughening of the monetary policy by the Fed could hurt our market, meaning the Russian market suffers from a double blow, Vernikov said.

Bogdan Zvarich, senior analyst at financial supermarket Banki.ru, said that the Fed’s Wednesday’s decision to stop the quantitative easing program in March and increase the rates, triggered sales on the U.S. bourses. The Dow Jones and the S&P 500, that rose before the meeting, lost 0.4% and 0.1%, respectively.

“On Thursday morning, investors continue to sell risky assets as they price in the results of the meeting. The leading Asian indices fell by up to 3.1%, the futures for the main U.S. indices lost over 1%, and the closest futures for the Brent oil blend fell by 0.8%,” Zvarich said.

This background will prompt he MOEX Russia Index to open with sales, and the pressure will only grow during the day. The only factor that could break the market trend and launch purchases is softening of the geopolitical risks, but it is very unlikely to happen, he said.

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