Global markets are getting caned, taking both oil prices and
petroleum-dependent Russian stock prices down with them. This seems
to be a simple kneejerk reaction; the Russian economy itself seems
to be holding up more than well.
[caption id="attachment_57184" align="alignright" width="300"
caption="Moscow at dusk"]
GDP expanded at an annualized rate of about 4.9% in the first
quarter, when the oil markets started unraveling. That growth rate
gives Russia an extra cushion of 0.8 of a percentage point more
than economists expected in the event the 10% decline in Brent
) since the end of March delivers a shock to the system.
Even with Brent at $100 a barrel, Russia has a lot of
wiggle room built into its macro environment. For all practical
purposes there is
. Consumption is on the rise, with retail sales up a healthy 7.5%
over last year, and overall investment is up 11.2% in the last year
If anything, the non-oil-driven domestic economy seems to be
accelerating. Industrial production is ramping up faster than last
year, when the euro crisis was at its worst and Brent was about
where it is now.
Naturally, the March numbers look less euphoric than they did in
January or February, but they're still well above where they were
At a minimum, there is a relief trade here. Vladimir Putin's
will provide some clarity, even if not all the names go the way
traders might hope.
BNO is testing long-term support now. A successful bounce could
be the signal for a relief rally in Moscow. Failure will probably
create even sweeter entry points, possibly sending the market down
another 10% to the October lows before everything is said and
Look for opportunities to come back into Russia, whether via
your favorite stocks or the broad portfolios like