Morning Note /

Alfa Morning Bulletin: 29 March 2021

  • Russian cyclical stocks rally

  • Markets unsettled this morning by large margin call

  • Russian stocks likely to find upward momentum this week

29 March 2021
Published byAlfa

Russian cyclical stocks rally: Risk appetite returned to the markets on Friday and Russian equities bounced back strongly – RTSI (+2.3% @ 1,450) and IMOEX (+1.5% @ 3,489) – driven by a firm rotation back into cyclical stocks as the prospects for economic recovery reignited the reflation trade. Russian tech stocks were also well bid. The ruble advanced (+0.4% @ 75.87) claiming back some ground from a strong US dollar as sanctions risk appeared to dial back. The container ship blocking the Suez Canal helped lift oil prices (Brent +3.9% @ 64.34).

Russian stocks likely to find upward momentum this week: We expect a sluggish start to the week for Russian stocks as risk aversion dials higher on global markets following a default on a margin call by a US fund after a $20 bn wave of block trades that has sent Nomura tumbling 16% this morning. Credit Suisse is also in the firing line and expected to book a loss of more than $4 bn. Covid cases continue to rise globally in a new wave, including the US, despite the vaccination rollouts. Oil prices have dropped this morning after the Ever Given, a giant container ship blocking the Suez Canal, was refloated (Brent -2.0% @ 63.22). US futures are pointing to a lower open. But we may see improvement in risk appetite during the week. On Wednesday, macro data from China due on Wednesday is forecast to show a rebound in both the manufacturing and non-manufacturing sectors and that may support the broader backdrop of improving global growth and should provide a tailwind to EMs, including Russia. There are also signs that sanctions risk against Moscow has eased back slightly and that should provide relief to the ruble, which lost 2.0% last week. On the global level, US President Biden is expected to unveil his infrastructure plans, which should be well received by the markets. Overall, we expect the reflation trade to gain pace and the rotation into cyclical stocks to continue.

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