- Risk-on as equities and commodities rally
- Markets on edge as investors weigh inflation with economic recovery
- Reflation inflates Russian cyclical stocks
Risk-on as equities and commodities rally: June started on a positive note, with equities and commodities rallying, as investors cast aside inflation fears and focused on economic recovery in the belief that the Federal Reserve will maintain loose monetary for the foreseeable future. That backdrop provided a strong boost to Russian stocks on Tuesday – RTSI (+1.0% @ 1,614) and IMOEX (+1.2% @ 3,764). The cyclical sectors led the charge higher. The currency market, however, was eerily quiet with no large moves in any direction (-0.1% @ 73.51). Oil prices soared to the highest levels in more than two years (Brent +1.7% @ 70.52) supported by the start of the US driving season as well as the improving demand outlook. The OPEC+ JMMC meeting agreed to continue the increases in output.
Reflation inflates Russian cyclical stocks: We expect the reflation trade to push Russian equities higher today with the support of higher commodity prices and a strong PMI manufacturing read from the US yesterday. Higher oil prices are providing a tailwind for the ruble. Despite the hesitation among investors, reopening expectations are overtaking concerns about inflation. The main macro event this week is the US payrolls for April due out on Friday. The data is not expected to change Fed policy, but investors will be watching for clues to the Fed’s plans for policy in the coming weeks and months. Cyclical stocks look well supported and should lead Russians equities higher today.
Russian railway cargo loading volumes rose 10.5% y/y in May and 3.5% y/y in 5M21 – NEUTRAL
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The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...