The Russian equity market advanced supported by strong buying from domestic investors

Global markets: Weekly overview

26 December 2008

Regardless of the fact that the US stock market historically performs better during the Christmas week, US stocks fell on Monday and Tuesday, erasing last week’s advance, as a deteriorating outlook for corporate earnings and commercial real estate offset expectations that government efforts to revive the economy will succeed. Having traded slightly higher in the first half of December 24, as consumer spending and orders for durable goods topped economists’ forecast, the US market remained closed for the rest of December 24 and 25.

European and Asian stocks retreated as well, sending the MSCI World Index to its fifth consecutive decline, amid concerns that deepening recessions in the US, UK and Japan will snuff out earnings growth. The MSCI World, which is a combination of 23 countries, is headed for its worst annual performance on record as credit-related losses and write-downs at financials companies pushed US, Europe and Japan into simultaneous recessions for the first time since World War II.

OPEC’s decision to cut production quotas on December 17 had little and short-lived impact on oil prices, which continued to decline on the back of the deepening global recession, after US housing prices collapsed. After it became known that US supplies of gasoline and distillate fuel increased more than expected, crude prices plunged more than 9% overnight, losing almost 15% versus last Friday’s close. Gold prices fell as well on expectations that the dollar will strengthen, reducing the metal’s appeal as an alternative investment and hedge against inflation.

The Russian equity market mainly advanced, ignoring the decline on global markets in the first half of the week, supported by strong buying from domestic investors. We saw the greatest demand in the most liquid names. In the absence of international trading, the Russian market retreated. The benchmark RTS Index managed to close the week slightly higher, adding almost 3.0%.

Source: Troika Dialog

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