RUSSIAN STOCKS DOWN AFTER U.S., ASIAN MARKETS SLIP

UNCLAS MOSCOW 001106 SIPDIS SIPDIS SENSITIVE STATE FOR EUR/RUS TREASURY FOR BAKER/GAERTNER NSC FOR TRACY MCKIBBEN USDOC FOR 4231/IEP/EUR/JBROUGHER E.O. 12958: N/A TAGS: EFIN ECON RS SUBJECT: RUSSIAN STOCKS DOWN AFTER U.S., ASIAN MARKETS SLIP REF: MOSCOW 841 ¶1. (U) This message is sensitive but unclassified and not for Internet distribution. ¶2. (SBU) U.S. economic reports that sent the NYSE and NASDAQ tumbling on March 13 had a similar effect on the March 14 trading session in Russia. The opening of the March 14 trading session saw the benchmark, dollar-denominated RTS Index 2.5 percent lower, and the broader, ruble-denominated MICEX Index was 4.4 percent lower; as of 6:20pm Moscow time, the indices were down 2.29 percent and 2.92 percent, respectively. Alfa Bank Chief Economist Natalia Orlova suggested that the lackluster figures have made relatively nervous investors more jittery about the short-term prospects that the U.S. "economic engine" can continue to support other economies. ¶3. (SBU) Troika Dialog Chief Economist Evgeny Gavrilenkov observed that lower crude oil prices have also added to short-term worries. He said the drop in the indices reflects concern about the percentage of market capitalization that is dependent on oil. Gavrilenkov noted that losses during March 14 trading would probably still be in line with his and other analysts' expectations for the post-Shanghai correction. He observed that both RTS and MICEX had been tredning gradually upward in the last week. Comment -------------- ¶4. (SBU) The main Russian indices remain within the consensus estimates for this correction. Most analysts forecast that losses could extend until mid-April and that RTS and MICEX could lose 20 percent off their February 27 "peaks." If our contacts have characterized the current Russian investor sentiment accurately, we would expect stock prices to track closely with upcoming key economic data releases in the U.S., Europe and Asia. BURNS