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Russia

Alfa Strategy: Weekly Radar – Russian market faces geopolitical headwinds

  • Rotation out of cyclicals into tech and growth stocks on the cards as dollar retreats and bond yields contract

  • Russian stocks advanced last week despite geopolitical tensions

  • Russian equities deliver strong 1Q21 gains

John Walsh
John Walsh

Equity Strategist

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Contributors
Denis Dorofeev
Boris Krasnozhenov
Alfa
6 April 2021
Published byAlfa

Rotation out of cyclicals into tech and growth stocks on the cards as dollar retreats and bond yields contract: There are mixed signals on the equity market this week. As we go to print, there are signs the short-lived rally that was triggered by the better-than-expected US Labor report last week has lost steam on concern over China’s move to curtail its loan growth, which has tempered optimism over the economic rebound. There are also worries over the sharp rise in Covid cases globally and fresh lockdowns which risk offsetting positive sentiment from strong economic data posted recent by the US and China. Geopolitical risks are rising for Russia as tensions escalate with Ukraine, which today announced it is pulling out of the Minsk peace talks. With sanctions risk in the background, it is hoped that pragmatism will prevail. The global reflation trade got a boost from the stronger-than-expected US jobs data last Friday and is triggering the market to price in an earlier start to Federal Reserve rate increases as well as tapering. Hence, the minutes of the 16-17 March FOMC meeting tomorrow will be in focus. The rotation from growth stocks into value and cyclicals is expected to remain in play over the coming months. That should provide a firm tailwind to Russian stocks. However, looking ahead to this week, a weakening US dollar and a contraction in US Treasury yields coupled with the large-scale US stimulus may play in favor of tech and growth stocks.

Other topics covered:

Russian stocks advanced last week despite geopolitical tensions

Russian equities deliver strong 1Q21 gains

Reflation trade and rotation into value and cyclical stocks has plenty of fuel in the tank

Third wave of Covid a worry

Geopolitical risks are rising for Russia as tensions escalate in Ukraine

The commodity universe continues to deliver positive trends

We expect oil to remain volatile this week due to Covid-19 concerns and the OPEC+ decision

Events for Russian corporates