Strategy Note /

Alfa Strategy: Weekly Radar - Omicron spooked investors but jitters are easing

  • Russia equities face uncertainty this week, but we see risk inching to the upside

  • The Omicron variant poses new market challenges

  • Geopolitical tensions continue to rumble in the background

John Walsh
John Walsh

Equity Strategist

Denis Dorofeev
Boris Krasnozhenov
30 November 2021
Published by

Russia equities face uncertainty this week, but we see risk inching to the upside: A semblance of calm has returned to the markets today as investors reassess their risk scenarios for Covid and the new strain. News flow on the Omicron variant of Covid can be expected to dictate market direction this week. The hope is that Omicron will be medically proven to have milder symptoms than Delta – such a scenario would see markets rebound, and policymakers pull back from additional restrictions. The OPEC+ meeting this week is attracting more attention than normal. Traders are watching tosee if the group will stick with the plan to proceed with output increases, even as Saudi Arabia and other producers push back against the release of strategic reserves by the US and other nations in an effort to push down energy prices. The market has rebounded today after last week’s selloff but Brent is expected to trade with volatility this week as traders assess the demand outlook considering developments on the Covid front. We see strong support/resistance for Brent between a range of $75-80/bbl ahead of the OPEC meeting on Thursday. Russia's investment case looks better supported at the moment by the potential that uncertainty surrounding Covid may delay monetary tightening by many global central banks which would help to prolong the reflation trade that has been very supportive of Russian equities since November of last year. We expect cyclical stocks to lead the advance this week.