Moscow’s
bourses look set to open with a small gain to reflect yesterday’s positive
session in GDRs, albeit that gain will be less than previously expected due to
the late sell-off in the US markets and Moody’s reminder that Greece’s debt
problems are far from resolved. The ruble should also see a small opening gain
with oil trading above $75 p/bbl again in Asia.
President
Obama’s latest comments about the oil leak will support the oil price while
hurting oil shares. Tougher regulation and higher operating costs are
inevitable. Russia’s economy and the ruble will be amongst the
beneficiaries.
Asia’s
markets opened down because of the late sell off in the US equity markets but
reversed that to a small gain by mid afternoon. A leading indicator of Chinese
activity gained 1.7% and signals still strong growth in that economy. That
indicator also helped reverse earlier weakness in oil and for
metals.
China’s
markets remain closed for the Dragon Boat Festival. The MSCI Asia-Pacific Index
is up 0.3% in late afternoon. The price of WTI for July settlement last traded
at $75.16 p/bbl, up from Nymex’s close of $74.97 p/bbl. Brent is at $75.32
p/bbl.
The
dollar-euro rate is at $1.221 (closed yesterday at $1.228) and gold traded at
$1.222.7 per ounce.
Moscow’s
bourses were closed for a holiday yesterday so the only action was in the GDR
and ADR markets. The main news event was the sale of a 53.2% stake in
Uralkali
by the controlling shareholder to several investment
umbrella funds. The sale price was not officially disclosed but news agencies
reported a price of $23 per GDR. Although unofficial, and the details/rationale
for the sale still very opaque, the report helped push Uralkali’s price 5.2%
higher to a closing level of $19.93. Speculation about the price and what may
happen next will likely lead to increased price volatility in the next few
days.
By the
time trade in Russian GDR’s closed in London with a gain of 0.8% yesterday,
investors were betting that the rally of the last few days could stretch a lot
further. The Dow Industrials Index in the US was almost 1.0% higher for the day
and the price of oil was trading just under $76 p/bbl. But, a bout of
nervousness over unresolved issues led to a late sell-off and a closing drop of
0.2% for the Dow.
Moodys
downgrade of Greek debt to junk was one of those factors. Even though S&P
had already cut its rating to junk weeks ago, the move by Moodys reminded the
market that the threat of default and contagion is still very real. Investors
will see strong growth in the US economy to fully counter-balance that threat
and, based on last week’s reports, we are still some way from that just yet.
Today’s reports, which includes the Empire State Manufacturing and a housing
index will help either calm nerves or send US markets further into reverse.
Meantime, Moscow’s bourses and most other markets will continue with a low
activity cautious approach.