Russian markets are experiencing extreme pessimism with the MOEX index dropping below 2500 points amid sanctions and Central Bank forecasts.
Last working week of October. Halloween on October 31, but the Russian market is already in Halloween mode. Key news highlights:
Total pessimism prevails:
- MOEX index fell below 2500 points.
- USDRUB near 79.5.
- CNYRUB at 11.2.
Main Causes
As usual, two interconnected reasons:
Trump reversed course again. No meeting with V.V. Putin. Sanctions imposed on Lukoil and Rosneft. New escalation policy. Russia showcased the new Burevestnik missile. Upcoming Trump-Xi meeting expected soon. Lack of progress on negotiations shifts key rate trajectory expectations.
The second factor is the Central Bank’s decision—or rather, its accompanying forecasts. Key points:
- Central Bank cut the key rate by 50 basis points to 16.5%.
- As a benchmark meeting, the Central Bank updated its medium-term forecast.
Average rate this year now projected at 19.2%. With one meeting left on December 29, it could theoretically drop another 25 basis points, but that won’t change much.
Next year, previous expectations were 12-13%; now 13-15%. Not only did the average rise, but the range widened significantly, increasing uncertainty. Thus, despite the rate cut, the meeting was net negative for markets.
MOEX index gapped down twice: first from October 23 (sanctions), second today (rate and backdrop). It broke below 2500 points, and the breakout appears genuine for now, though it’s early to judge.
Next support range: 2370-2430 (Q4 2024 lows), implying another 4% downside potential from current levels.
Year-to-date stock market decline: about 14.4%—worse than 2024, but unlikely to match 2008 or 2022 drops.
What Should Traders Do?
Accumulating stocks for the long term (conflict end, rate normalization) is a sound strategy, but prepare to hold for a while. Otherwise, opt for bonds. Minimize risk by avoiding developers and high-debt companies. Review your portfolio and exit such positions.
Currency outlook remains poor. USD unlikely to drop much below current levels; expect 80-90 range through year-end.
Global News
Oil price surged on Russia sanctions, now at $66 per barrel.
Gold corrected to near $4000. Potential for further drop depends on whether Trump and Xi sign a trade deal. Expect they will eventually.
Fed meeting Wednesday: Markets 100% expect 25 basis point US rate cut.
That’s all for now. Stay calm and monitor developments.
FAQ
Why did MOEX index drop below 2500?
Sanctions on Lukoil/Rosneft, Trump escalation signals, and Central Bank’s higher 2026 rate forecasts increased uncertainty despite a 50bp cut to 16.5%.
What is the outlook for USD/RUB through year-end?
Expect range of 80-90; unlikely to fall sharply below current 79.5 levels amid ongoing pressures.
Should traders buy stocks now?
Accumulate for long-term on conflict resolution and rate normalization, but prepare for extended holds; prefer low-risk bonds short-term.
