Russian economy holding its own despite oil’s dive

By Emerging Money>,

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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"] Image courtesy Mika S: [/caption]

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 crude ( BNO , quote ) 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 no inflation . 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 as well.

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 around Thanksgiving.

At a minimum, there is a relief trade here. Vladimir Putin's choice of cabinet appointments 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 done.

Look for opportunities to come back into Russia, whether via your favorite stocks or the broad portfolios like RSX ( quote ).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
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