Morning Note /
Russia

Alfa Morning Bulletin: 29 November 2021

  • Markets endured a sharp post-Thanksgiving selloff on Friday that dragged stocks and commodities lower

  • Omicron variant sent markets into a tailspin on Friday

  • Russia poised for a rebound as risk appetite improves

Alfa
29 November 2021
Published byAlfa

Black Friday: Markets endured a sharp post-Thanksgiving selloff on Friday that dragged stocks and commodities lower as investors sought safe haven assets such as the yen, the US dollar, gold and Treasuries. The discovery of a new Covid variant (Omicron) in South Africa triggered the selloff although markets were already on edge due to a massive surge in Covid cases across Europe last week. Lockdowns have ensued and some borders are being closed raising fears for global growth.

Russian equities tracked a steep drop in EM assets – RTSI (-4.6% @ 1,589) and IMOEX (-3.5% @ 3,810) – with losses across-the-board sector-wise. The ruble capitulated along with other EM currencies (-1.3% @ 75.60). Demand was strong for the Swiss franc and the Japanese yen. Oil prices plummeted (Brent -11.6% @ 72.72) as traders worried that lockdowns and restrictions may impact demand. There is a steep selloff of Russian stocks with gold miner POLY (+1.4%) one of the few defensive names in positive territory.

Russia poised for a rebound as risk appetite improves: Markets have steadied this morning after Friday’s selloff that was triggered by the discovery of a new mutation of the coronavirus named Omicron. Despite the concerns for global growth, US and European futures are pointing to a higher open today. Oil prices have also rebounded this morning. Energy prices, especially gas, should see support from a sharp drop in temperatures across western Europe over the weekend and early snowfalls. Against that backdrop, we expect Russian equities to bounce higher this morning. The Russian investment case is also supported by the potential that uncertainty over Covid may delay monetary tightening by many global central banks which would prolong the reflation trade.

KEY NEWS

Inflationary expectations reported at 13.5% for November – NEGATIVE

VTB (E/W): 10M21 IFRS results – NEUTRAL

Magnit (O/W) expands its chain in Kazan – NEUTRAL