By Eurasia Business News – December 17, 2020

View on the skyscrapers of “Moskva City”, the main business and financial center of Moscow, the capital of the Russian Federation. Photo credit : Eurasia Business News.

The Russian stock market rose on Thursday following the growth of foreign markets and rising oil prices. The Moscow Stock Exchange index updated its historical maximum amid news from the annual press conference of the Russian President Vladimir Putin, after which it backed slightly by the close of trading as part of a correction. Leading values in growth were the shares of Gazprom and the shares of RusAl.

As a result of trading, the Moscow Exchange index amounted to 3282.67 points (+ 0.4%, the maximum of the day and a new peak – 3318.39 points), the RTS index – 1419.22 points (+ 1.4%).

The US dollar dipped to 72.87 rubles (-0.48 rubles), gold rose to $ 1898.0 per ounce (+ 2.1%).

The Russian President Vladimir Putin said at a press conference on Thursday that the Russian financial system is stable and that banks’ profits in 2020 are estimated at 1.3 trillion rubles. According to the Central Bank of the Russian Federation, the profit of banks for 10 months has already reached 1.3 trillion rubles.

According to Vladimir Putin, Russia is starting to get off the oil and gas needle as 70% of the Russian budget would not be formed anymore from oil and gas revenues.

Gazprom shares (+ 4%, to 214.29 rubles) renewed their maximum since February after Russian President Vladimir Putin expressed hope for the early completion of Nord Stream 2.

“Nord Stream 2 is almost completed, 160 km are left, I hope the work will be completed” said the head of the Russian State. Moscow hopes that the new US administration will return to the practice of normal and fair competition, Putin said, speaking about the prospects for completing the Nord Stream 2 project, the construction process against which the United States enacted sanctions.

Putin also said that the Russian economy will recover to the pre-crisis level caused by the coronavirus by the end of 2021 – the first quarter of 2022.

To confirm this forecast, Russia ranked second in Bloomberg’s ranking of emerging market countries with good economic prospects in 2021.

In the new report on the Russian economy, the World Bank predicts that due to more noticeable than expected economic activity in the third quarter, the Russia’s GDP in 2020 will decrease by only 4% and not 5%, as the Bank expected in September. The World Bank’s Chief Economist for Russia, Apurva Sanghi, noted that countercyclical fiscal and stable, consistent monetary policy, against a backdrop of significant macro-fiscal reserves, helped to limit the impact of the health crisis on the national economy. The World Bank expects that the Russian GDP will gradually rebound at 2.6 and 3.0 percent in 2021 and 2022, respectively. The poverty rate, under the upper middle-income poverty line of USD 5.5 per day, is expected to decline in 2021 to below 2019 levels as the economy recovers.

The forecast was improved due to several key sectors at once: financial, agro-industrial complex, telecommunications, as well as public administration. In addition, the situation was influenced by the news about the OPEC + agreements, which stabilized oil prices.

In this favourable context Russian values expanded on Thursday at the Moscow stock exchange, mostly commodities and energy companies : Polymetal (+ 4%), PJSC Polyus (+ 3.3%), MMK (+ 0.8%), MTS (+ 0.5%), Inter RAO ( + 0.5%), Rosseti (+ 0.4%), ALROSA (+ 0.3%), AFK Sistema (+ 0.3%), Aeroflot (+ 0.2% ), Norilsk Nickel (+ 0.2%), Gazprom Neft (+ 0.1%), Tatneft (+ 0.1%), VTB Bank (+ 0.1%).

The shares of the following Russian companies fell : Severstal (-1.9%), RusHydro (-1.2%), Surgutneftegaz (-1%), NLMK (-0.8%), Yandex (- 0.8%), Magnit (-0.6%), LUKOIL (-0.4%, to 5,157 rubles; the stock exchange cut off the dividends of NK for 9 months – 46 rubles per share), Sberbank (- 0.1%), NOVATEK (-0.1%), FGC UES (-0.1%).

Sanctions to continue

Meanwhile, the EU Council on Thursday decided to extend the economic sanctions against the Russian Federation for six months, until July 31, 2021. The European sanctions are extended every six months after the EU summits based on an assessment of the implementation of the Minsk agreements on the settlement of the conflict in Ukraine, according to the countries participating in the “Normandy format” – Germany and France.

The sanctions limit access to EU primary and secondary capital markets for certain Russian banks and companies and prohibit forms of financial assistance and brokering towards Russian financial institutions. The measures also prohibit the direct or indirect import, export or transfer of all defence-related materiel and establish a ban for dual-use goods for military use or  military-end users in Russia. The sanctions further curtail Russian access to certain sensitive technologies that can be used in the Russian energy sector, for instance in oil production and exploration.

Shares of the aluminium giant RusAl (-6.2%) and its parent En + Group (-4%) fell after Bloomberg reported that European officials had sent information to the US government that the Russian businessman Oleg Deripaska, according to them, continues to take direct participation in the management of RusAl and influence its management. The officials would consider that as a breach of a U.S. sanctions agreement reached in 2018.

RusAl called the information about the influence of businessman Oleg Deripaska on the company’s management false and untrue, reported Kommersant :

“Rusal strongly disagrees with the allegations of violation of the agreement with OFAC (Office of Foreign Assets Control, a division of the US Treasury), contained in an article by Bloomberg. We consider the outlined speculations false and untrue”.

Oil prices rise

The cost of February futures for Brent oil on the London stock exchange ICE Futures on Thursday reached $ 51.37 per barrel, which is higher than the price at the close of the previous session. On September 27 the futures for Brent crude oil were traded at $ 41.61 per barrel while on November 24 the price reached $ 47.72 per barrel.

The price of WTI crude oil futures for January in electronic trading of the New York Mercantile Exchange (NYMEX) amounted to $ 48.27 per barrel on December 17 which is higher than the level of previous trading. 

Oil prices have every reason to jump as the announced vaccines are a big deal generating optimism for 2021 and the global economic recovery. Vaccination campaigns already started in the United States, Canada and the United Kingdom.

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