Russian Daily Monitor

Money market

The U.S. economy continues to show signs of firm expansion, with Chicago
PMI data providing strong signs of a rebound on Friday. However,
euro-dollar dynamics
* still the main driver on the Russian FX market
*
saw dollar weakening on Friday, ignoring data releases supportive of the
greenback. We believe market players are holding back from aggressive
dollar purchases (and euro sales) likely until clearer signs of U.S.
economy growth appear. Upcoming ISM manufacturing figures, due Monday, may
prove to be a trigger for a move towards a stronger dollar. That, in turn,
should result in a dollar that is stronger against the rouble as well.

Bond market

Rouble bond dynamics still lack any clear direction, unsettled by
month-end money market volatility and a lack of enthusiasm to buy at
current low yields. We still see an increasing likelihood of a downward
correction in the medium term, which might be triggered by growing yields
on the Russian external debt market. However, the combination of upcoming
liquidity relief after tax dates pass and emerging summertime calm on the
stock market may help to postpone a move towards higher yields on the
rouble bond market.
Russian eurobonds continue to track the benchmarks, which are stuck on a
downward trend, enhanced by further strong data from the United States.
Chicago PMI, released Friday, surprised on the upside, triggering a sharp
fall on the market. Figures for the ISM manufacturing index, due Monday,
are expected to confirm the solid expansion of the U.S. economy and, thus,
give grounds for more prolonged interest rates hikes from the Federal
Reserve. For this reason, market dynamics in the medium term are expected
to show further yield expansion.
On Friday, the EMBI+ Russia index hit a record low of 138 on a fall in the
benchmark yield of 9 bps and a lack of movement from Russian eurobonds. On
Monday the Russian segment should follow U.S. Treasuries, whose spread is
likely to widen to 146.

Equity market

With the summer lull finally kicking in, we expect a lack of direction on
the equity market on Monday. Some traders will continue placing their bets
on whether the market can outbid its all-time high of 785.52.
Brent prices, meanwhile, have inched 1.4% higher to USD 59.7/bbl,
supporting Russian oil valuations. That said, Sibneft might experience
some selling pressure as Moscow Mayor Yury Luzhkov on Saturday threatened
to sue Roman Abramovich over the alleged dilution of Sibneft-Yugra, which
Sibneft is accused of orchestrating.
The Russian equity market declined 0.03% to 778.93 on moderate volumes on
Friday, while most stocks closed in black: Lukoil grew 0.12%, Norilsk
Nickel soared 1.25% and Surgut
,s share price climbed 0.87%. A decline on
the RTS occurred because Sberbank shares dropped 2.83% after a long-drawn
price rally. ADRs trading in New-York were mixed: oil and gas stocks were
in favour, with Gazprom and Lukoil adding 1.89 and 0.36%, respectively,
while telecoms failed to hold their ground. MTS and Vimpelcom dropping
1.45% and 1.59%, respectively.