The bet was not enough

A correction has begun in the stock market

Yesterday, for the first time in the last few days, the Russian stock market declined. The main reason is the decline on Western trading floors . Judging by the financial indicators, large foreign banks are far from successful, and this leads investors to believe that the measures taken by the US Federal Reserve are insufficient. Russian stock indices lost 1.75--2%. However, analysts note that the decline was mainly of a speculative nature, and the pre-New Year rally may continue.

On Wednesday, several US banks reported significant losses. Bank of America, Wachovia and PNC Financial Services said losses on bad debts will be larger than expected. Bank of America is likely to write off more than $3 billion in subprime mortgages. Wachovia could lose $1 billion against the previously predicted $500-600 million. After such news, fears intensified in the market that the rate cut undertaken by the US Federal Reserve would not be able to prevent a recession.

Against this background, shares of Societe Generale fell by more than 4%, and HSBC by more than 3%. European indices fell under pressure from banking sector shares. By the close of trading, the British FTSE lost 1.02%, the French CAC 40 - 1.32%, and the German DAX - 0.64%.

American markets opened in the red yesterday. The Dow Jones fell 0.33% and the NASDAQ dropped 0.56%. This was facilitated by the publication of data on an increase in the producer price index in November by 0.4%, although analysts predicted its increase by 0.2%; as well as poor quarterly results from investment bank Lehman Brothers, whose profit fell 11% in the fiscal fourth quarter.

Following the results of yesterday's session, the RTS Index fell by 1.75%, to 2318.67 points; MICEX index - by 2.08%, to 1928.99 points. “Yesterday, the Russian stock market was unable to resist the negative trends that came from the West,” notes Alexander Potavin, deputy head of the analytical department of the Antanta-Pioglobal Investment Group. -- Investors reacted painfully to reports from American financial institutions about further losses due to the credit crisis. This has heightened market concerns that the Fed's actions may not be enough to prevent another liquidity crisis." As you know, on Tuesday the Fed decided to cut the base rate by 0.25 percentage points, to 4.25% per annum.

“The market reacted negatively to the decision of the world’s largest central banks on joint actions aimed at improving the financial sector,” said Dmitry Savchenko, an analyst at Brokercreditservice. -- Investors viewed the move as an admission of weakness throughout the financial system. As a result, futures for American indices in the morning set a pessimistic tone for Asia, which passed the baton to Russian markets.”

Despite the rise in oil prices the day before, the quotes of leading Russian companies lost 1.5-3% at the end of the trading day, notes Mr. Potavin. The leaders of the fall were shares of Gazprom, which fell by 3.5%, LUKOIL (-1.95%), RAO UES (-1.82%), Norilsk Nickel (-2.42%), Sberbank (-2.26%). “The shares of our gas giants, Gazprom and NOVATEK, were sold yesterday,” the analyst points out. “Investors took profits on these securities, which showed better dynamics over the past month.” However, there was no aggressive dumping of shares yesterday, Mr. Potavin continues, which means that the market was at the mercy of speculators, but the majority of investors kept the securities in their portfolios, believing in the continuation of the Christmas rally.

Nikolay KOCHELYAGIN