What happened in the world of finance in a week # 8

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Currency markets

Exchange last week opened with a slight increase and a subsequent fall in the dollar and euro. The very next day, the European currency exceeded 76 rubles, but by the end of the week there was a fall below 73 rubles (the dollar fell below 63 rubles).

Multidirectional movements of foreign currencies against the ruble occurred against the backdrop of fluctuations in oil prices caused by the death of Saudi Arabia’s King Abdullah — traders were waiting for signals from government representatives about what the country's future oil policy would be.

On Friday, the price of Brent crude oil first rose to $ 49.90 a barrel, but after the announcement of the appointment of a new king (they were 79-year-old crown prince Salman ibn Abdul Aziz, Abdullah’s half-brother and deputy head of the council of ministers), who immediately announced on the continuation of policies aimed at maintaining market share (and refusal to reduce production for the sake of rising prices), the price of Brent fell below $ 48.8 per barrel.



As a result, at the beginning of exchange trading on Monday January 26, an increase in foreign exchange rates was recorded (the dollar rose to more than 65 rubles, the euro to 73 rubles).

Low oil prices affect not only Russia - this is how, in his weekly review, chief economist of ITinvest Sergey Egishyants describes the situation in the US oil industry:

The Saudis price war puts pressure on the USA more and more: in 3 months the number of wells fell by 15%, reaching a 2-year bottom - analysts are waiting for the collapse to reach a minimum of 3.5 years; if we count gas wells, then their sum is the worst in more than 4 years; oil imports, which had previously collapsed, went up sharply - and so on. But against this background, there is no increase in prices - because demand is very weak (the IMF has again lowered the estimate of global economic growth), and also because of the surge in Iraq’s supply: the country's record production has been record-breaking and export has been at its peak for 30-35 years.

The victory in the parliamentary elections in Greece of opponents of austerity measures led to a decline in the euro below $ 1.11 - this is at least since 2003.

ITinvest analyst Vasily Oleinik in his review described the possible consequences of these events:

[...] The risk, which should be laid not only Russian investors, is associated with Greece. Last weekend in the country held parliamentary elections, in which a crushing victory was won by the party "SYRIZA". Already on Monday, the leaders of the coalition of radical left forces (SYRIZA) that won the parliamentary elections and the right-wing nationalist party, the Independent Greeks, reached an agreement on the formation of a ruling coalition and now the process of forming the government will begin. While we are not talking about Greece’s withdrawal from the eurozone, however, the country's refusal to pay its debts may dramatically worsen the situation in all financial markets. Already in February, the Greeks will have to repay or refinance almost 4 billion euros, and if they refuse to pay, a chain reaction can quickly follow. It should be noted that from the launch of the asset repurchase program (QE), which was announced by the European Central Bank, and which starts in March this year, Greece will not receive a penny.

The situation with the EUR / USD currency pair and the events affecting it in the transfer to YouTube was described by the economic observer of RBC Zhanna Nemtsova:

Stock markets

January 19, one of the two main Russian stock indexes - the MICEX index - rose above 1600 points for the first time in more than a month.



At the beginning of last week, the RTS index, calculated in dollars, rose above the closing level of previous trades.

At the end of the week, amid news that the ECB decided to launch a quantitative easing program at 60 billion euros per month (lasting from March 2015 to September 2016), the MICEX index was able to grow to a key level of 1,700 points for the first time since summer 2011, however, then rolled back down a bit. At the end of the day, the MICEX index rose by 0.31% and amounted to 1,671.80 points, the RTS index - by 0.47%, to 820.99 points.

In the weekly review, Vasily Oleinik told about the current situation on the Russian stock market and possible developments in the near future:

The start of the week on the Russian stock market was in a negative way. The MICEX ruble index lost within 2%, and the RTS currency index sank by almost 4%. The Russian currency also came under pressure, and on the first trading day it lost almost 3% to the dual currency basket.

There are several reasons for concern among Russian investors. The main one is the aggravation of the situation in Ukraine and the growth of geopolitical risks. At the weekend, hostilities broke out with a new force and so far, neither side is ready to go to a peaceful dialogue. It cannot be ruled out that the military confrontation will only gain momentum before the end of this week, so that at the next meeting the European leaders will have new reasons for imposing another portion of sanctions against Russia. Do not forget about the rating agency Standard & Poor's, which already this coming Friday could lower the credit rating of the Russian Federation to a “speculative” level. The worse the situation develops in Ukraine, the greater will be the chances of a downgrade. Formally, in the current economic situation, Russia's sovereign rating corresponds to the “investment” level in almost all criteria, but the political pressure from the United States can easily outweigh all the arguments.

[...]

At the end of last week, we recommended Russian investors to sell all risky assets and prepare for a 5-7% retracement. The start of the current week, in terms of technology, confirmed a turnaround on Russian indices. If we consider that the cumulative net cash outflow from funds investing in Russian stocks for the period from January 15 to January 21, 2015 was about $ 182.5 million against the outflow of $ 56 million a week earlier, we can safely conclude that all twenty percent January rally on the Russian MICEX index took place only on domestic money. And if so, then at the slightest reason for a correction, sales will be sharp and strong. Immediate correction goals and the nearest strong support on the MICEX index are now in the range of 1500-1520 points. The likelihood that these marks will be achieved in the next 4 weeks, we now estimate as high.

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

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