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Risk aversion provokes attack on Swiss franc


The increased concerns over the European debt crisis after the Spanish bondauction on Wednesday meant that questions about solvency in the Eurozone resurfaced, leading to a second consecutive day of widening in the 5Y CDS across Europe, with Portugal (+16bp) remaining at the edge of the surge. Meanwhile, the sharp switch in risk sentiment over the last 48 hours has spurred a flight out of Eurozone assets elsewhere, and the Swiss franc appeared to be a safe haven, with the Swiss central banks stepping into the market after the attack on its floor at 1.20 pushed through. Nevertheless, selling pressure in the market was countered by short covers ahead of the long weekend in the US and UK, while upbeat jobless claims data from the US softened the negative sentiment.

As for Russian stocks yesterday, in terms of sectors Metals and Mining names were generally in greater demand, while Energies and Financials were a mixed bag. Among individual liquid stocks, LUKOIL (+1.5%, 1.0x 1M avg volume), Gazprom Neft (+1.4%, 0.1x) and Rosneft (+1.0%, 0.6x) looked particularly strong in the Energy sector, while Polymetal Intl (3.8%, 1.2x), Severstal (+2.0%, 0.9x) and Evraz Group (+1.8%, 1.0x) outperformed in the M&M sector. Key Financials also ended the day with gains. Elsewhere in the liquid space we note the advances of FSK (+1.8%, 0.9x) and Yandex (+2.2%, 0.7x). The most significant laggard of the day in the liquid space was Alliance Oil (-10.2%, 3.4x, - 25% YTD), which continued to suffer losses on the news of its 1Q12 operating results, released on Tuesday. TNK-BP Holding (-0.4%, 0.5x), AFK Sistema (-1.7%, 1.8x) and MRSK Holding (-1.2%, 1.0x) also ended the day on the bleak side. In the less liquid space, the news about’s (+2.7%, 2.4x) strong 2H11 and FY11 IFRS results provided the company with an impressive daily return on elevated volumes.

As we go to print, the Asian stock indices are some 0.5% lower on average (China is hanging on to positive territory after a strong 1.5% move against the market yesterday). S&P500 was little changed at -0.1% ahead of the long weekend. EUR is consolidating at 1.3069, a 0.9% decline yesterday. 10Y UST were at 2.18%, 4bp tighter. Oil managed to climb overnight to USD 123.4/bbl (+0.9%).

This morning, EPFR reported that net inflows into Russian equities for the week ending 4 April decelerated: USD 73mn vs. the average for the last four weeks of USD 139mn. Inflows were mainly channelled through GEM funds which attracted USD 92mn, while Russia-dedicated funds saw a marginal USD 16mn inflow. Globally, weekly inflows for all EM funds were negligible at USD 42m, with GEM funds (+USD1.1bn) remaining the only positive contributor to the aggregated number.

Otherwise, on the Russian corporate agenda we have Sberbank reporting its 1Q12 RAS numbers and the 1Q12 trading update from Raspadskaya. Today’s calendar is fairly light, with only US March nonfarm payroll report and US February consumer credit on the list. The UK and US markets are closed today due to national holidays. 

Alexey Zabotkin, Sergey Galkin, Anastasia Markina
VTB Capital analyst

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