Monday, July 28, 2008

1) Russian stock market plummets: Major Russian exchange sells off after Putin criticizes a large steel firm and the CEO of a key oil company abruptly leaves the country.

July 25, 2008: 2:20 PM EDT

MOSCOW (AP) -- Investors piled out of Russian stocks Friday after the abrupt departure from the country of a foreign oil boss and the prime minister's unexpected severe criticism of a large steel firm.

MICEX, the exchange where the bulk of trading in Russian stocks takes place, plunged 5.5% by the close of markets, while the RTS Index lost 5.6% to sink to its lowest point since March.

After Prime Minister Vladimir Putin's scathing attack on Mechel late Thursday, heavy trading in New York sent the steel and coal maker's stock down nearly 40%, wiping more than $5 billion off its value - though shares rose around 20% in early trading in New York on Friday.

The losses were mirrored Friday in Russian trading.

Putin criticized the company, which is the largest supplier of coal for steelmakers in Russia, for charging much higher prices for raw materials domestically than it does for its exports. He called for an antitrust investigation into Mechel's activities.

Earlier Thursday Robert Dudley, CEO of the embattled Anglo-Russian oil producer TNK-BP, left the country three days before his visa was due to expire. Russia has not renewed the visa on the grounds that he allegedly does not have a valid work contract.

Dudley, who said in a statement his departure follows a sustained assault on the company in the past several months, vowed to run the company from abroad.

The developments rattled investors, leading to a heavy sell-off in Russian equity, which is dominated by oil stocks.

"Sentiment is moving against Russia," said James Fenkner, managing partner at Red Star Asset Management in Moscow. "If oil has any kind of bounce, the market will look kindly on Russia. If oil [prices] begin to slip, there will be a great unwind."

Observers say soaring oil prices have largely masked the political tensions bubbling beneath the surface, and investors are tensely watching how the corporate conflict plays out at TNK-BP, widely seen as a test case for foreign investment under new President Dmitry Medvedev.

Medvedev, who campaigned on an anti-corruption ticket, has insisted the conflict is a matter between the shareholders. Many analysts are convinced, however, that the state wants to take a controlling stake in the company at a later date via a state-owned entity.

While the TNK-BP dispute has spooked investors, observers were skeptical that the onslaught on Mechel heralded a politically motivated attack of the type that brought Yukos oil company to its knees and caused lasting harm to Russia's investment image.

"I think the probability of this becoming a Yukos-style asset grab is relatively small," said Red Star's Fenkner. "But if it's an asset distribution, then all bets are off."

In a research note, Chris Weafer, chief strategist at UralSib, said, "The last train carrying the optimists out of Russian equities has just left the station. Let's hope it's just for a vacation rather than emigration."

2) Commentary by David Zwebner, CEO of CommStock Trading

U.S. Economy

The U.S. Commerce Department said that durable goods orders were up .8% in June, much stronger than expected. Excluding defense, orders were up .1%. Also, May's orders were revised from unchanged to up .1%. The June eurodollars closed down .075 at 96.53. The U.S. Census Bureau said that new home sales were at an annual rate of 530,000 units in June, down .6% from May, but much better than expected. May's new home sales were revised higher, from an annual rate of 512,000 to 533,000 units. So far in 2008, new home sales are down 35% from a year ago. November lumber ended up $2.10 at $256.40.

Grains and Cotton

Bloomberg news reported that the managing director of Cotton Corp. of India reduced his estimate of India's upcoming cotton crop from 35 to 31.5 million bales due to dry weather. The extent of damage from Hurricane Dolly is not yet official, but the Associated Press reported that much of the 92,000 acres of cotton in Texas' Rio Grande Valley was probably ruined by the storm. That represents roughly 2% of all the cotton planted in Texas. December cotton closed up .64 at 74.50.

Cocoa

The General Union of Ivorian Workers in the Ivory Coast is calling for a general strike on July 31st to protest the high cost of living. September cocoa closed up $69 at $2,813.

Orange juice

Late yesterday, the USDA estimated in its World Citrus Report that U.S. orange juice production was up 24% in 2007-2008 from the previous year. They also expect 327,000 tons of ending stocks (at 65 degrees Brix), or 41% of annual production. For some reason, the USDA has not yet released its Orange Juice world market report. September orange juice was down 1.90 cents at $1.1250.

Energies

Yesterday, an oil spill yesterday covered 100 miles of the Mississippi river from New Orleans to the Gulf of Mexico. September crude oil closed down $2.23 at $123.26 with oil production resuming in the Gulf of Mexico now that Hurricane Dolly has passed by. While U.S. automakers are going down the drain, Honda earned a record high $1.7 billion in the second quarter.

Currencies

The Office for National Statistics said that real GDP was up .2% in the second quarter, the slowest growth since 2001. From a year ago, real GDP was up 1.6%. The September British pound ended up .0054 at $1.9820.

Japan's Statistics Bureau said that consumer prices were up .5% in June and up 2.0% from a year ago. In Tokyo, consumer prices were up 1.6% in July from a year ago, the biggest gain in ten years. The September yen fell .0049 to .9293, near its lowest close this year.

David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com

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4) Closing Prices for Friday, July 25, 2008

Amidex: Amidex35 (Class No Load Shares), $15.31; Index, 2207.68, Daily Change, .46%; “A” Shares NAV, $11.81.

Global Asset Management: Capital Appreciation, $264.08; Composite Absolute Return, $906.97; Diversity, $731.93; GAMCO, $901.98; Interest Trend, $253.07; Trading IV-US$ Class, $147.66; US$ Special Bond Fund, $440.47.

Invesco: Asian Equity Core, $4.86; Bond, $25.76; Emerging Markets Bond, $19.88; European Bond, EUR 4.2659; Gilt, GBP 11.83; Global High Income, $11.66; Japanese Equity Core, $1.41; UK Equity, GBP 4.87.

JPMorgan Fleming: JF Eastern Smaller Co., $103.32; JF Japan, JPY 17,729; JF Japan Equity, $13.12;

JF Japan OTC, JPY 1,068; JF Japan Smaller Companies, JPY 39,520; JF Japan Technology, JPY 49,530; JF Korea, $41.47; Pacific Securities, $198.04; Pacific Smaller Companies $23.09; Global Bond & Currency, $21.83;

JF America, $43.47; JF Europe, $46.94; JF Germany, EUR 20.64; JF Global Equity, $40.49.

PCP: North America, $11.99; Europe, $19.11; Emerging Markets, $18.01; Balanced, $8.39; Aggressive, $7.05.

Platinum (updated once a month – June 2008 Prices): All Weather, $127.47; Equity Plus, $94.39; Prot. Equity Plus, TBA; Cap. Prot. Income Plus, TBA; Cap. Prot. Income Plus A, TBA.

Scottish Provident: Adventurous 1, GBP 2.799; Balanced 1, GBP 2.298; USD Adventurous 1, $2.309;

USD Balanced 1, $2.195; USD Cautious 1, $2.059; For Preference: Baring GUF Eastern Europe, $149.22; Fidelity Funds International, $34.620; Invesco Asian Equity Core, $4.940.

CommStock Trading Ltd
PO Box 7777
Jerusalem 91077
Tel: +972-2-6244963
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