The MOEX Index opened sharply higher on Monday, August 11, reaching nearly 3000 points before correcting to around 2975 points.
What Drove the Move?
Markets are reacting to ongoing reconciliation efforts, with presidents scheduled to meet on August 15 in Alaska to discuss potential conflict resolution outlines. This has triggered a flood of information and speculation, keeping the market highly volatile and tied to political developments.
The outcome may amount to little concrete progress, potentially allowing further upside to 3100-3150 points. However, two unfilled gaps remain: one from August 7 at 2835 points and another from Monday’s session. The latest gap could close soon, leading to a pullback to around 2900 points, followed by a reversal above 3000.
Toward week’s end, gains could extend higher, but profit-taking after the meeting might trigger a new correction. This is one possible scenario, as certainty is impossible in such dynamics.
USDRUB holds steady at 79.8, unchanged from last week despite a brief retest of 82.6. Finance Ministry data revealed a 7-month budget deficit of 4.88 trillion rubles (2.2% of GDP).
Why This Matters
- Last year’s deficit was just over 1 trillion rubles—now it’s four times higher.
- The full-year plan is 3.79 trillion rubles, already exceeded.
- Deficit growth reduces chances of rate cuts, as financing it fuels inflation.
Options are limited: slash spending (unlikely without ending the conflict), boost revenues (challenging with current oil prices), or increase non-oil/gas income (uncertain). Alternatively, more debt means higher inflation and delayed rate reductions.
Overall, the economy is slowing further, visible to all parties involved in negotiations.
The Central Bank noted in its latest Financial Markets Risk Review that net foreign currency sales by 29 major companies fell to 86% of export revenue in May. July saw rising currency demand from legal entities, but no major trend shift yet.
Global Updates
Oil prices continued falling, as markets doubt significant cuts to Russian supplies.
Gold prices edged up but stay in the 3250–3450 corridor. Last week, a Reuters fake claimed U.S. tariff hikes on gold ingots; the White House is set to refute it.
EURUSD sits at 1.16. The dollar strengthened briefly below 1.14 last week, but momentum faded. Trump named a likely next Fed chair, raising odds of further U.S. rate cuts.
FAQ
What caused the MOEX Index spike on August 11?
Anticipation of a presidential meeting on August 15 in Alaska discussing conflict resolution drove speculation and volatility.
Why is Russia’s budget deficit concerning for markets?
It exceeded the full-year plan at 4.88 trillion rubles in 7 months, signaling inflation risks and lower odds of Central Bank rate cuts.
How are global commodities impacting Russian markets?
Falling oil prices reflect doubts on supply cuts, while gold holds in a range amid U.S. policy noise.
