The Russian equity market surged following strong bond market support

Global markets: Weekly overview

US equity markets continued the strong upward trend that began on January 23 for the first three days of the week after a number of US companies posted better than forecast earnings and on the back the Obama administration’s plan to absorb toxic assets and stabilize lenders’ balance sheets. The positive momentum was broken on Thursday, when a new round of glum earnings reports, lagging demand for durable goods and job cuts, provoked a sell-off on the US market. However, the major US indexes managed to close the week slightly higher.

European and Asian markets followed Wall Street, advancing in the first three days of the week and retreating after US government reports spurred concerns that earnings will deteriorate as the economic slump deepens. Major European bourses managed to close the week up 2.5-4.5%. Asian exchanges posted gains of 2.5-5.0% on the week.

Crude posted its biggest weekly decline this year, losing more than 10%, as concerns about a deeper global recession outweighed OPEC’s plans to increase output cuts. Crude supplies at Cushing, Oklahoma, where oil that is traded on NYMEX is stored, climbed to 33.5m bbl last week, its highest level since the department began keeping records in April 2004.

Following Wall Street’s strong performance on the previous Friday and much stronger bond market support, the Russian equity market surged on Monday (the RTS Index added 8.3%, the biggest one-day jump since November 25, 2008), led by energy producers, which rose on the back of firming oil prices, and Sberbank, which climbed on investor relief at 9m08 IFRS results. For the remainder of the week, most attention was on the ruble, which lost almost 7% w-o-w on the spot market. The bi-currency basket approached R41/USD-EUR1, the lower band set by the Central Bank. Continued buoyant bond prices supported the continuation of the equity market rally in ruble terms, though in dollar terms, some of Monday’s gains were given back over the remainder of the week. The ruble-denominated MICEX Index gained 12% on the week, whereas the dollar-denominated RTS Index rose only 6%.

Source: Troika Dialog

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