What happened in the world of finance in a week # 21

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Currency and commodity markets

The beginning of last week was marked by the Bank of Russia's increase in currency repo rates (foreign currency loans issued by the Central Bank to banks on collateral), which led to a weakening of the ruble — the dollar rose to 53.3 rubles on Monday April 20 and the euro to 57.3 rub.

Accordingly, the cost of borrowing in foreign currency for banks increased, and they began to stock up on it “for the future” - analysts of financial organizations interpreted the increase in repo rates as a signal from the Central Bank that the ruble had recently become too strong, and hence the correction was not far off.



Changes in exchange rates

And indeed, on Wednesday, April 22, the first deputy chairman of the Central Bank, Ksenia Yudaeva, announced the completion of the ruble strengthening caused by rising oil prices.

Strengthening of the ruble, associated with a sharp movement in oil prices, has ended.

During the bidding on Thursday, April 23 at the ICE exchange, the price of futures for Brent crude for delivery in June 2015 rose to $ 64.26 a barrel, which is 2.4% higher than the close level of trading on Wednesday. Against this background, and in spite of the statements of the Central Bank, the ruble strengthened - the exchange rate of the dollar in trading on the Moscow Stock Exchange fell below 51 rubles. The official dollar exchange rate on Thursday, set by the Central Bank, also dropped and amounted to 50.2473 rubles (the official euro exchange rate also dropped to 54.659 rubles).

The chief economist of ITinvest Sergey Egishyants in his weekly review told about the situation in the commodity markets (oil, metals, agriculture, etc.):

The failure of drilling activity is growing - in the oil industry the annual decline is already more than 2 times: this is in the USA - in Canada it has reached 4-5 times. Because the price of oil does not fall - the global support line seems to have stood; release in the States at the bottom for 6 weeks. And this is despite the general gloomy background of commodity markets: natural gas in the United States dropped to $ 90 per 1000 cubic meters, industrial metals fell down - except for nickel, but it already stands at perennial lows; precious metals are not so gloomy - but the fun is also not observed. Agricultural products, to put it mildly, do not shine with optimism - they even felt sad before the strong cotton and rape, what to speak of the already bleak grains, legumes, fodder, vegetable oils, coffee, cocoa, fruit, and especially sugar and wood. Pork is still sad; Beef is also bent down - only milk gives signs of life in the livestock segment. But in general, the market is still very weak - and as long as the dollar is powerful, this situation will continue.

Stock markets

The weakening of the ruble at the beginning of last week had a positive effect on the ruble MICEX index - on Tuesday, it rose above the psychologically important mark of 1,700 points. The dollar RTS index, on the contrary, fell below 1000 points. Subsequently, the indices did without significant fluctuations - the week the MICEX index finished at the level of 1,682 points, and the RTS index amounted to 1037 points.

ITinvest expert Vasily Oleinik, in his analytical material, told about possible changes in the Russian stock market:

Russian stock indices continue to live their lives and increasingly react not internally to external factors, but to the inside. A strong ruble not only kills the Russian economy, but also kills the attractiveness of investments in Russian exporters, who are not under the first day under strong selling pressure. There are no fundamental reasons for the growth of Russian stocks and the growth of the MICEX ruble index right now, so the only driver for growth can again be only a significant drop in the national currency, which should start in the coming days and weeks.

[...]

The Russian ruble is now supported by two factors: oil quotes, which on Thursday reached new maximums for the current year on the news of the resumption of the military operation in Yemen, as well as the tax period, which ends after two working days. As for the first factor, it is not yet clear how much more it will support oil prices, and what military premium will be included in the quotes. The second factor is temporary, this is the period of tax payments. The peak of the April fiscal period falls on April 27-28, when MET payments, VAT, income tax and excise taxes will be settled, so the ruble will still have temporary support. Greatly below 50, the US dollar is unlikely to hold.

The MICEX ruble index over the past two days has confirmed its reversal. While the MICEX index fell into the range of support of 1620-1650 points, which can keep the defense of investors for several days. As soon as we see a breakdown of this range and the close of the day below the 1600 points mark, the potential for a correction of at least 10% will open. Immediate correction targets are near the 1500 points mark.

Oil or gas?

As part of the ITinvestTV educational channel, leading RBC-TV Zhanna Nemtsova talked with Alexander Nazarov, director of Gazprombank’s analytical department, about current demand and supply in the oil market, what Shell-BG landmark deal entails, and what are the advantages of Russia in LNG production.



That's all, thank you for your attention. More analytical materials from leading experts on the ITinvest website .

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Images: TASS, RBC