Strong growth for Russian gold

The Russian market continued upward in July, despite renewed focus on the risk of sanctions.

The US House of Representatives approved a change to the National Defence Authorization Act for 2020 that can force the president to ban US banks from trading in new Russian government debt. However, the change must be approved by the Senate before it can become law.

There was positive news surrounding gas company Novatek when it sold 10 percent of the Arctic LNG-2 project to a Japanese consortium before reporting strong quarterly results. It posted record cash flow, and EBITDA rose 8 percent for the quarter.

At the end of July, Gazprom placed 2.9 percent of its stock held in treasury (USD 2.2bn) in the market. The share rose sharply on the news.

Retailer X5 released a strong quarterly report, with sales growth of 14.4 percent, and steel makers NLMK, MMK and Severstal unsurprisingly also published fairly good results. Gold companies Polyuz and Polymetal have recently been doing well and published strong numbers, showing robust growth. The diamond market has not been strong of late, and this was clearly reflected in Alrosa’s June figures when sales of rough diamonds fell 16 percent. However, the company expects the market to recover in the autumn.

Russian inflation continues downward, and the June number was 0 percent. The annual rate could be down to 3 percent, against the central bank target of 4 percent, so rate cuts are likely to be accelerated. Growth does not look at all good and may even be below the earlier forecast of 1.5 percent, so lower interest rates are needed.

OPEC and Russia have agreed to continue to support oil prices, and existing production cuts have been extended to April 2020.

The conflict between Iran and, mainly, the United States and Britain in the Persian Gulf is worth watching. An escalation could lead to significantly higher oil prices, which of course would affect Russia.

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