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15:15 Moscow time the index of Masuri grew up 0.17% to 2710,91 p., and the RTS grew 0.24% to 1310,64 p. External background was positive, but the Russian market has long worked for its growth in the last month. Looming dividend cut-off of large companies that will deter purchases.
The General pessimistic mood in oil provided the weakness in oil market that prevailed among the leaders of the fall: “Rosneft”, “Tatneft”, “LUKOIL”. Fall of the price of the shares in anticipation of reporting over the five months of the current year. Among the leaders of the day were “rosseti”, “inter RAO”, “VTB”, preferred securities of Sberbank and SAFMAR. Activity is markedly decreased compared to the previous day and the middle of trading the volume of transactions in the main section of the Moscow exchange amounted to about 24 billion rubles.
The domestic currency continued to strengthen against the backdrop of placement of OFZ. By the middle of Moscow trading, the barrel of Brent cost about 4020 rubles. One-day rate MosPrime has decreased to 7.88%, week to 7.98%, and monthly increased to 8.08%. The Finance Ministry on Wednesday holds auctions of OFZ. On the first of these investors were offered OFZ-PD issue 26227 maturing on 17 July 2024. Succeeded paper on 47,487 billion rubles at face value with demand 112,513 billion and the average yield of 7.64%. In General, the auction is considered successful, although it is noticeable that the Finance Ministry is not ready to place the paper with excessive premium. Negative for the market can be considered as a world Bank forecast for GDP growth Russia in the current year. Expectations have been lowered to 1.2% from 1.5% in the December assessment.
However, it also suggests that the CBR will have more reasons to implement expansionary policies. In fact, macroeconomic data also make us think about the incentives. The index of business activity in the services sector Russia fell in may to 52.0 p. p. 52.6 in April. The interest of the residents to the OFZ also supports the growing gap between the yield of OFZ bonds and U.S. Treasury obligations. If the fed will conduct a series of rate cuts or at least hint at it, the pressure on risky assets will decline. By 15:15 GMT USD/RUB – 65,157 (-0,01%), EUR/RUB from 73.34 (+0,05%).
European stocks continued to pare dovish rhetoric from fed officials. In any case, the majority of market participants regarded the standard statements of the President Dzh. Powell that the Federal reserve will act to stimulate the economy in light of the possible impact of a trade war. Statistics for the Eurozone was slightly better than initial estimates. The index of business activity in the services sector rose to 52.9 points in comparison with the preliminary estimate of 52.5, which increased the composite indicator to 51.8 from 51.6 p. p.
Even in the UK the index of activity in the services sector rose to 51,0., which was above the forecast of 50.6 p. in April to 50.4 p. on the other hand, producer prices in the Eurozone reduced the growth rate to 2.6% from 2.9% in April, while it was expected to accelerate to 3.2%. Retail sales growth of 1.5% in April in line with expectations. Almost all sectors in Europe were trading in positive territory. The exception was a Bank that loses a risk free way of earning money while lowering the fed rate. By 15:15 GMT DAX 12016,94 p. (+0,38%), CAC 40 5300,51 p. (+0,61%), the FTSE 100 – 7252,44 p. (+0,53%).
Optimism in the equity markets is not yet in the growth of quotations of oil reserves which continue to grow in the United States. However, this is not a serious problem. A stronger impact on the prices have disagreements under the agreement, OPEC+. Once again the head of “Rosneft” Igor Sechin expressed his dissatisfaction with the limitations of the production, as it believes that it takes a share of Russia in the global market.
At the same time, if you look at the numbers, the share of Russia in key markets has only increased in recent years, and the U.S. share is growing due to political pressure on Iran and Venezuela. At the moment production in Russia is of 10.87 million bar., due to problems with transportation on the oil pipeline “Friendship”. In April production exceeded 11.2 and 11.3 million bar. a day. By 15:15 GMT Brent crude – $61,72 (-0,40%), WTI – $52,89 (-1,10%), gold – $1339,4 (+0,81%), copper – $5842,27 (-0,71%), Nickel – $11795 (-0,14%).
The dollar index was up 0.03 percent 97,10 p. AUD weakened 0.15% against the greenback while NZD has strengthened by 0.4%. By 15:15 GMT EUR/USD – $1,126 (+0,04%), GBP/USD – us $1.27 (+0.01%) and USD/JPY – 108,31 (+0,15%).
ADP Services reports that in may the private sector of the American economy has created a total of 27 thousand new jobs. Expected about 180 thousand new jobs. Against this background, the yield on 10-year Treasury obligations of the United States again fell below 2.1%. On the market estimate the probability of a rate cut, the fed in September at 90% and the second decline in December, at 80%. Futures on major indices pointed to a market growth of 0.4% in the S&P 500 up 0.6% in the NASDAQ.
One of the main recipients of the current situation on the market becomes the gold that a month has already risen by 4.5% and over the year by 3.3%. As a rule, Central banks in developed countries prefer to deal with the risk of recession by lowering rates and quantitative easing, leading to a blurring of the value of paper currencies.
Equity markets are also a way to protect against inflation of the printing press. Accordingly, even a trade war does not frighten the investors, if there appeared prospect of monetary policy easing by the American regulator. The Russian market is taking a breather because the past month has been one of the most powerful, but lately, it keeps growth strong fall in oil prices. On the other hand, falling yields of us Treasury obligations increases the interest in Russian high-yield debt instruments.
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Andrei Kochetkov,
Senior analyst,
“Opening Broker”