How economic news affects the stock market
Many have heard that the stock market (and more broadly, the financial system of any country) often responds to external events by increasing or decreasing quotes. Reports that this or that news "brought down the market" appear in the media with enviable regularity. Another such incident occurred today, when, after the announcement of the next sanctions by the United States against Russian companies and officials, the stock market and the rate of the national currency of Russia declined. Leaving aside the political component of this issue, we found it interesting, nevertheless, to take a closer look at the mechanics of the impact of news on the stock market on this particular example.
What's the news
As reported by the media, sectoral sanctions of the United States imposed on the company "Novatek", "Rosneft", Vnesheconombank and Gazprombank. As a result of this action, the assets of the listed companies will not be frozen, but American organizations and citizens are now prohibited from investing in new stocks and bonds of these enterprises.
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A number of companies in the military-industrial complex of the Russian Federation, including the Almaz-Antey Corporation and the Kalashnikov Concern, the Izhmash Scientific-Production Association, the Bazalt Scientific Research and Production Association, the Uralvagonzavod Concern, the Radio Electronic Technologies Concern, and the Concern Constellation, NPO Mashinostroeniya, OAO Design Bureau of Instrument Engineering.
Market reaction
After the opening of trading on domestic and foreign stock exchanges, the quotes of Rosneft and Novatek collapsed - by 14.59 Moscow time, the shares of Rosneft fell 4.46% to 233 rubles. for security. At the opening they fell by 5.4%. Shares of Novatek fell 8.87% to 364.6 rubles. The cost of Novatek depositary receipts fell by 11.27% to $ 103.9 per share, while Rosneft’s receipts decreased by 5.58% to $ 6.67 per one receipt on the London Stock Exchange.
Dollar exchange rate to 14.43 Moscow time rose by 60.65 kopecks. to 34.99 rubles, and in the course of trading, even exceeded 35 rubles. The euro rose by 83.1 kopecks to 47.34 rubles. The RTS index fell to 15.71 Moscow time by 4.71% to 1,286.97 points. MICEX fell 3.05% to 1,430 points.
In a conversation with the publication “Vedomosti”, analysts of financial organizations noted the negative impact of similar news on the stock market. In particular, one of them noted:
[Negative news] is a long-running topic that will have a negative impact on Russian companies (credit will become more expensive) and, in general, on the Russian economy through increased credit risks and, accordingly, higher borrowing costs.
Why
The editorial of the IT Invest blog asked Vasily Oleinik , an analyst with the company, to explain why today's news had such an impact on the quotes, and whether it was possible to extract some benefit from this:
Today's collapse is the strongest fall since March 3. From soft sanctions that affected only individuals, the United States moved to tougher economic sanctions that affect the activities of individual companies and entire sectors of the economy. The so-called new "sectoral" sanctions can significantly worsen the situation in the Russian economy, which will immediately affect the stock market. Investors' pessimism is explained by the fact that the first stage of such restrictions will hit the organizations that came under them - all of them have lost the US capital borrowing market and will not be able to borrow money in the USA and will be forced to do it in other countries.
As a result, due to a shortage of capital, a number of medium-term and long-term projects can be frozen, and the work of such state structures as VEB and Gazprombank can become much more complicated, and the government is unlikely to be able to significantly help. Liquidity problems are already beginning to put pressure on many Russian companies and the Central Bank cannot help everyone. Russian credit organizations have been attracting money even for any non-market assets for the first month, thereby worsening the balance of the Central Bank.
As a result, Russian companies will have nothing left to do, how to find new capital for long-term projects, for example, in the Asian region, but they are unlikely to succeed. This situation is extremely deplorable and it is possible that the United States will not stop there. The following strikes on the Russian economy can be stronger, the only question is whether Europe will support them, since Europe is the main trading partner of Russia. Hope is only for common sense and the boomerang effect, because if the EU makes Russia worse, it will also make itself worse.
The package of economic sanctions introduced today is really nonsense. For the first time in history, they were introduced not through the UN Security Council, but through supranational organizations of the European Union, governmental organizations of the USA, Germany, Canada, Australia, etc. The reason for this is the senselessness of sanctions measures against Russia in the UN Security Council, because the country is a member of it. and has veto power.
It was almost impossible to play such an event and make money on it, since the Russian market discounted most of the negative at the opening and then spent the whole day near the minimum marks. Only those who left for the night in short positions could earn on this news, but it is very difficult to predict the release of such news, although they are often expected.
In the following posts we will examine in more detail with practical examples the impact of news (both economic and political) on the financial system and the stock market, in particular. Not all news has a short-term impact, as in the case discussed above — it is important to understand the signs that long-term and short-term “type” news has in order to correctly determine their possible financial implications.
Posts on the topic:
Source: https://habr.com/ru/post/230235/
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