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Russian stock market resumed corrective growth

Last Thursday, the Russian stock indices MosExchange (+ 0.72%) and RTS (+ 0.31%) completed the main trading with a moderate increase in relation to the levels of the previous close. At the end of the evening session, the Moscow Exchange (IMOEX2) index dropped 0.36%. Thus, yesterday we saw an attempt at corrective growth in the Moscow Exchange and RTS indices after a fairly large-scale drawdown that took place in the middle of the week. However, this technical reverse movement was restrained by the heavily depreciated heavy securities of Norilsk Nickel. Their negative contribution to yesterday’s deviation of the above index was almost 0.5%. It should be noted that at the end of the main session the local stock market managed to maintain its positive morning mood. Meanwhile, in the course of the evening trading, the mood on the external markets deteriorated significantly. This applies to both key Western stock indices and oil futures. Among the significant external signals, we draw attention to yesterday’s publication of a number of positive macroeconomic indicators in the United States. The re-preliminary estimate of US GDP growth for the 4th quarter was improved from 4.0 to 4.1%. According to preliminary estimates, January volume of orders for durable goods increased by 3.4%. In addition, the number of initial applications for unemployment benefits amounted to 730 thousand, which turned out to be significantly less than the forecasts and the corresponding indicator of a week ago. As often happens, the positive news became an incentive for the overdue profit taking in the US stock market. At a time when investors and speculators expect new stimulus measures from the government and the Fed, statistics are often interpreted according to the paradoxical principle “The worse, the better …”. At the close of the evening trading session, the March futures on the RTS index (RIH1) came into a state of significant backwardation the value of 29 p. or about 2.0% in relation to the basic indicator. Derivatives market participants significantly worsened their assessment of the medium-term prospects of the RTS index. Against the background of the ambiguous dynamics of the Moscow Exchange index at the end of the day and evening trading sessions, the most liquid stocks mostly closed with an uneven multidirectional deviation within 1-3%. : Severstal (CHMF RM, + 2.81%), NLMK (NLMK RM, + 2.52%), MMK (MAGN RM, + 1.05%), Mechel-ao (MTLR RM, + 2.54%). Yesterday, we observed a corrective rebound in these securities after quite active sales that took place the day before. In addition, the interest in them was associated with the evening deterioration of mood on the oil market. This usually stimulates the “shift” from the shares of oil and gas companies to the securities of representatives of other export sectors of the Russian economy. Lenta other papers (LNTA RM, + 2.97%) continued their growth, which had begun the day before, on increased trading volumes. Interest in them was fueled by the recent publication of the issuer’s positive annual financial statements under IFRS. The retail chain’s revenue in 2020 increased by 6.7% yoy. In addition, it recorded an annual net profit of RUB 17.4 bn. against a loss of RUB 2.1 bln. for 2019. The closest technical target and strong resistance for these securities is the round price level of 280 rubles. In January of this year, they turned downwards from the indicated level, with the shares of GMK Norilsk Nickel (GMKN RM, -6.61%) again leading the fall among blue chips. They continued to play out a number of negative corporate news from the issuer. The latest of them was the news of the partial suspension of the operation of the Oktyabrsky and Taimyrsky mines due to the ingress of groundwater. This factor could have a negative impact on the production volumes of the mining and metallurgical company. Earlier we said that by mid-February the shares of Norilsk Nickel looked overbought. As a result of the recent sales, this overbought has already been largely leveled out. But the technical potential for a further mid-term drop in these securities is still not exhausted. Perhaps it will resume after a short-term rebound upward. This morning, futures for US stock indices are showing an uneven fall in value within 0.5-1.1%. Brent crude oil contracts fell 1.3%. Gold futures lost 0.9%. The Chinese stock index Shanghai Composite sank 2.1%. Japanese Nikkei225 lost 3.5%. The state of the external background before the start of trading in Russia can be confidently described as negative. This creates conditions for the opening of the Moscow Exchange index with a fairly strong decline. We expect the opening of the Moscow Exchange index with a decrease in the range of 0.4-0.8%, in the range of 3385-3395 p. The levels of 3370, 3350 p. Will be significant resistance levels. 3400, 3420 p. In the first minutes of trading, the Moscow Exchange index will win back a fairly strong morning deterioration in the external background. Later, it is able to stabilize in negative territory near the opening level. In the afternoon, local traders will habitually focus on the dynamics of oil futures and the nature of the opening of the US stock market. The publication of the final February value of the US consumer confidence index from the University of Michigan (18.00 Moscow time) may have an indirect impact on the Moscow Exchange index .___________________ Vitaly Manzhos, Senior Risk Manager, Algo Capital Investment Company

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