Global markets have made a firm positive move since the start of the year on the back of the deal on the US fiscal cliff (although temporary), coupled with eased tensions in the Eurozone and improved macro data flow out of China (its FY12 GDP growth is due to be released this Friday). Across the globe, equity indices have advanced 3% YTD, with the MSCI DM trading around a multi-month high, just a hair below the last peak at end-April 2011 (after which the market retreated 23% in two months).
However, this time the investor mood is bullish, as reflected in equity fund inflows and the market price action, including VIX index, which hit its lowest level since June 2007 last week, and the positive momentum could be extended until the new round of discussions on the fiscal cliff in late February and the US debt ceiling. As for Russian equities, so far this year they are in line with the DM performance and slightly ahead of the EM universe (MSCI RU +3% vs. MSCI EM +2%). With the Russian market’s relative underperformance over the last 14 months, its wide 50% valuation gap to the EM has the leeway for further outperformance. Last week’s strong inflows into Russian equities funds amounted to USD 495mn, which was the highest value since February. Stock-wise, Steels (+8% on average) are the leaders YTD, followed by Banks (+7%) and selected Gencos (from +5 to +11%). On the domestic front, the Federal Customs Services has published draft amendments to the law aimed at easing the customs procedures for cargos. Among the proposed changes are a simpler procedure for registering as an authorized economic operator, and abolishing the advance deposit requirement to become an authorised economic operator.
This move is further evidence of the growing momentum in the government’s effort to improve the business climate. The draft has yet to be discussed by the interested companies before final fine-tuning. As we go to print, major Asian equity indices are in the black (the Japanese market is closed today due to a national holiday). On Friday, the US equity market closed flat (S&P 500 was unchanged), but European equities managed to gain a bit (Stoxx 50 added 0.4%). This morning US equity index futures are trading higher, while Brent is up at USD 111/bbl and Gold is advancing at USD 1,665/oz. EUR at 1.3396.
Later this week, China reports GDP for 4Q12 and monthly activity data for December. Otherwise, the US earning season picks up a gear this week with major financials, GS and JPM, reporting on Wednesday and BoA, Citi, and Amex on Thursday.