Premarket Actions: Russia is Breaking Market Rules Left and Right

But, surprise! The benchmark MOEX index rose as much as 10% in early trading. The index was up about 5% in afternoon trading in Moscow.

Here’s why: Russia’s stock market is not operating under normal rules. The central bank prevented foreign investors from selling their shares and prohibited short sales. Only 33 shares were allowed to trade on Thursday.

Context: Foreign funds owned more than 80% of shares traded on the Moscow Stock Exchange in the first half of 2021, according to Reuters. The United States and Canada concentrated 54% of the total, with 22% from the United Kingdom and 21% from the rest of Europe.

The Biden administration was not very impressed with the “reopening”.

“Russia has made it clear that it is going to spend government resources to artificially prop up the shares of publicly traded companies,” Deputy National Security Adviser Daleep Singh said in a rare White House statement on financial markets elsewhere. country.

“This is not a real market or a sustainable model, which only underlines Russia’s isolation from the global financial system,” Singh added.

Preventing foreign investors from selling shares is not the only way Moscow is breaking traditional market rules. President Vladimir Putin said on Wednesday that “enemy” countries would have to pay in rubles for gas from Russia.

That’s not going to go down well with countries and companies that have contracts that stipulate they’ll pay for gas in euros or US dollars. The German government has argued that any demand to pay for gas in rubles would represent a breach of contract.

“It is not clear how Western countries will be able to access enough rubles to finance gas imports, or even whether they would be willing to pay in rubles,” said Liam Peach, emerging Europe economist at Capital Economics.

This is not the first time that Moscow has suggested that it will abandon its financial commitments. Russian Finance Minister Anton Siluanov said earlier this month that Moscow will pay creditors of “hostile countries” in rubles until sanctions are lifted, even if contracts call for payment in dollars.

Big Picture: Credit rating agencies have responded to Moscow’s apparent willingness to ignore the rules by downgrading the country’s debt rating. Fitch has warned that a default is “imminent”.

Preventing foreign investors from selling shares and trying to rewrite contracts will further isolate Russia, according to analysts.

“The long-term implication is that [this] accelerates Russia’s de-dollarization strategy and reinforces the idea that Russia will continue to drift towards autarky,” Peach said.

Good news for the economy can be found in these actions

Here’s a promising sign from Wall Street: Transportation stocks lead the market this year. That could bode well for the broader economy, reports my CNN Business colleague Paul R. La Monica.

The Dow Jones Transportation Average, a group of 20 stocks that includes major rail, trucking, air and cargo companies, is up 7% this month and flat year-to-date.

Meanwhile, the better-known Dow Jones Industrial Average, which includes leading companies like Apple, Coca-Cola and Disney, is down 5% in 2022 as investors fret over rising interest rates and inflation.

When the Dow transportations outperform the rest of the market, it is often considered a positive macroeconomic indicator.

It means that consumers are buying a lot of things from Amazon and Walmart that need to be shipped to warehouses and retailers. And it’s a sign that people are traveling again, both for pleasure and business.

Car rental firm Avis Budget, the Union Pacific Railroad, trucking company JB Hunt and airlines Alaska Air, Southwest and JetBlue are among the best-performing transportation stocks this year.

The strength of transportation stocks is even more notable given rising energy prices. Oil has soared more than 50% to around $115 a barrel in the United States.

Of course, potential problems remain for the sector. They include supply chain issues, trucker labor shortages and the resulting need to raise wages, and a recent spike in Covid cases.

Meme actions are back

Shares of GameStop and AMC, two companies beloved by marketers on Reddit and other social media platforms, are rising again.

GameStop shares were up more than 30% on Tuesday and up another 16% on Wednesday. AMC soared 15% on Tuesday and gained 20% on Wednesday.

GameStop appeared after the company’s chairman of the board, Ryan Cohen, co-founder of online pet supply retailer Chewy, bought another 100,000 shares. “I put my money where my mouth is,” he tweeted Tuesday. His RC Ventures now owns 9.1 million shares, an 11.9% stake in the retailer.

Cohen hopes to turn GameStop on its head with investments in NFTs and other cryptocurrency and blockchain initiatives. He brought in two former Amazon executives to be the new CEO and CFO.

AMC is also benefiting from some executive chatter on Twitter.

The theater chain’s chief executive, Adam Aron, tweeted Tuesday about his excitement over the upcoming spring and summer movie slate and defended the company’s purchase of a more than 20% stake in miner Hycroft.

“So funny. Narrow minded calls our investment in Hycroft… ‘stupid’… ‘idiotic’. AMC understands how to raise cash and stretch debt,” Aron wrote, referring to his company’s recent refinancing plans. .

“Tons of crows eating ahead, and it won’t be me!” the executive director added.

Both GameStop and AMC have dropped this year, along with the broader market. AMC shares are still down nearly 20% in 2022, despite a nearly 45% surge in the last five days. GameStop shares are down 3% this year, even after soaring 65% last week.

Until next time

Darden Restaurants, TD Synnex and NIO report earnings on Thursday.

Also today:

  • US Unemployment Claims at 8:30 am ET.
  • EIA data on natural gas inventories

Coming soon: US Pending Home Sales and Consumer Confidence data from the University of Michigan.

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