- Market sentiment seesawed between economic recovery and inflation fears
- Yuan trades at a three-year high, but the PBOC has just hiked reserve requirements on foreign currency deposits
- US payrolls in focus but very unlikely to change dovish Fed stance
The dividends theme is currently the main catalyst in the Russian equity universe: This week has got-off to a slow start with the US and the UK closed on Monday for a holiday. Most Asian markets retreated Monday morning after manufacturing PMI numbers from China showed factory activity slowed slightly to 51.0 in May from 51.1 in April as raw materials costs grew at their fastest pace in over a decade. On that note, the inflation / economic recovery theme is likely to dominate market sentiment again this week with US President Joe Biden’s $6.0 tn budget plan for the upcoming fiscal year likely to be under the spotlight, as Congress dissects and debates the finer details. Friday’s May payrolls report can also be expected to be closely watched. On the Russian domestic front, the St. Petersburg International Economic Forum (SPIEF) will take center stage. This may provide a gauge of international investor sentiment towards Russia after years of sanctions and strained relations with the West. The event will give the Russian elite (political and business) the chance to showcase opportunities for foreign investors. The Covid pandemic remains as potent as ever, but signs of a robust global economic recovery are taking precedence. Amid a weakening US dollar over the weekend and today commodity prices have been creeping back higher and that should be supportive of Russian cyclical stocks, with the reflation trade showing signs of strengthening last week. That said, as we go to print, the PBOC unexpectedly announced it would hike the required reserve ratio on foreign currency deposits at financial institutions from 5% to 7%, effective from 15 June. The move may generate headwinds for hard commodity prices. The dividends theme is currently the main catalyst in the Russian equity universe, although a successful SPIEF event would likely inspire some confidence ahead of the Putin-Biden summit in mid-June.
St. Petersburg International Economic Forum: Russia is hosting the St. Petersburg International Economic Forum (SPIEF) on 2-5 June. President Putin is expected to address the audience on 4 June and there are expectations that he will also hold a meeting with foreign journalists. This could provide a platform to deliver some message to counterparties ahead of the summit with US President Biden in mid-June. There were previously rumors that the Russian cabinet is considering a new economic plan for the coming years which could potentially be presented at the forum.
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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...