Index Mosex, inflation, shares of steelworkers: investor digest

Mobiri Index

The Russian stock market on Wednesday, October 7, showed a slight increase. The index of the Moscow Exchange (IMOEX) according to the results of the main trading session increased by 0.4%, to 2337.41 points.

The ruble benchmark practically ignored both the preliminary approval by EU diplomats of the new sanctions package and the statements of the Russian Foreign Ministry regarding the lack of any activity of the American and Ukrainian sides in terms of continuing the negotiation process, Natalia Milchakova, an analyst at Freedom Global, told Reuters. Corporate news and forecasts for strong IFRS results for the third quarter come to the fore. The continuing uncertainty over the Middle East conflict is creating support for global oil prices, which is favorable for Russian stocks.

Natalia Milchakova did not rule out that after the index of the Moscow Exchange reached the level of 2350 points, profit may be recorded. However, the correction will not lead to the breakdown of the uptrend as a whole. The index can continue moving towards 2380-2,400 points.

In the “Digital Broker” expect that the index will continue to trade this week in the range of 2300-2400 points. Positive in geopolitics will allow testing the upper limit, but the acceleration of inflation and tight monetary policy of the Bank of Russia can return the index to 2,280 points, says Ivan Efanov, a leading analyst at Digital Broker.

On the morning of Thursday, October 8, the index of Moscow, according to 8:00 GMT, decreased by 0.43% to the close of the main trading on October 7, to 2327.36 points.

Dmitry Peskov told TASS that it is not clear when exactly the conversation between Vladimir Putin and Donald Trump can take place.

Inflation

According to Rosstat, from September 29 to October 5, the consumer price index increased by 0.96%. A week earlier, growth was 0.12%.

Year-on-year inflation was at 7.17% compared to 6.26% on September 28, the Ministry of Economic Development reported. The department recalled that from October 1, housing and communal services tariffs were indexed. Against this background, prices in the service sector for the week increased by 5.14%.

“Inflation data have been unfavorable. Although its surge was expected due to the planned increase in utility tariffs, many could still hope for a less tangible acceleration in consumer price growth, said Dmitry Babin, an expert at BCS World of Investments.

After deducting the effect of tariffs, inflation was about 0.2% against 0.12% a week earlier, Vasily Karpunin, head of information and analytical content at Alfa-Investments, estimated. This is a negative background for those who expected to soften the PrEP at the October meeting of the Central Bank. And although the increase in tariffs reduces the demand of the population for other goods, in October-November we expect inflation expectations to grow, the expert predicted.

“We believe that at the meeting on October 23, the Bank of Russia will keep the key rate at 14%, there are practically no prerequisites for easing the PrEP,” said Alexey Devyatov, an investment analyst at Alfa-Investments. According to him, the data for the next two weeks can be significant for the October decision of the Central Bank: they will show whether weekly inflation returned to its previous pace or the acceleration of stable components continued.

Stocks of steelworkers

Shares of Russian steel companies continued to rise strongly on Wednesday. Quotations of Severstal added 2.63%, to и693.4 per share, MMK - 1.14%, to и22.23 per share, NLMK - 1.95%, to и75.14 per share. In just three days of trading, the securities of these companies rose by 7-9%.

The sector shows a noticeable sensitivity to the factor of geopolitics. The improvement of the geopolitical situation for Russia can expand the opportunities for faster reduction of the key rate in the longer term. This will support the recovery of demand for metallurgical products, primarily from the construction sector, said Dmitry Babin, an expert at BCS World of Investments.

The BCS also believes that steel producers may not pay as much as a tax on super profits. Earlier, the Minister of Finance of the Russian Federation Anton Siluanov announced the achievement of a compromise with the business on the tax on super income. According to him, for companies, which due to price spikes in a particular year increases the amount of tax, there is a smoothing mechanism.

Other important developments

Rosstat will publish an estimate of the consumer price index for the week from September 29 to October 5. The Ministry of Finance will hold an auction for the placement of OFZ 26252. USA: weekly crude oil reserves according to EIA - 17:30 GMT.