Obama Hopes Push Rally Into Sixth Day

Russian stock markets rose for a sixth straight day Wednesday, hoping audaciously that a victory of Barack Obama in the U.S. presidential race marked a turning point in the financial crisis.

Jumping back after a three-day holiday weekend, the MICEX and RTS have soared 49 percent and 51 percent, respectively, since their close on Oct. 24.

In early morning trading, the MICEX jumped as much as 14 percent before being shut down for an hour and then plummeting downward in a "correction." After falling back 95 points, the MICEX slowly recovered, closing the day up 1.1 percent.

While the dollar-denominated RTS Index experienced a comparatively minimal 3 percent morning advance, it too had erased the gains at midday before recovering to close up 3.4 percent at 829.8 points.

Norilsk Nickel, the country's biggest mining company, led the MICEX with a 6 percent gain on news that the government would get a seat on its board.

Sberbank closed the day up 2.8 percent after Finance Minster Alexei Kudrin said the country's capital outflow, estimated at $140 billion since August, had reached its peak and would significantly slow down in the coming months.

After the MICEX reopened at midday, both indexes climbed as President Dmitry Medvedev gave a provocative state-of-the-nation address, blasting U.S. foreign and financial policy and proposing six-year presidential terms.

But domestic politics likely had little influence on Russian markets, said Tom Mundy, an analyst at Renaissance Capital, adding that they were likely just playing catch-up to a strong market day Tuesday in the United States and significant gains for Russian firms, led by steelmaker Evraz, on London's FTSE on Monday and Tuesday.

"I think [domestic Russian] politics is important to those that follow it, but I don't think that it's the main [market] driver," Mundy said, adding that the U.S. election had likely played a much more significant role.

"There was a clear rally going into Obama's victory. As far as the domestic market was concerned, Russian traders had a natural catch-up on that," he said.

First Deputy Prime Minister Igor Shuvalov offered a similar take, saying of Obama's election, "The first reaction of the stock market says that there is hope," Interfax reported.

The buzz of the morning after wore off quickly, however, and the inevitable correction soon followed.

"An increase of more than 10 percent in the morning [seemed surprising], which is why I've seen the correction that happened slightly later as more rational," said Yevgeny Nadorshin, chief economist at Trust Investment Bank.

Coming off the markets' largest winning streak since Medvedev's inauguration in May, some wondered how long the rally would last.

Kingsmill Bond, chief strategist at Troika Dialog, said the markets had just seen a bear market rally — not the tail end of the bell curve, while others just scratched their heads.

"[The markets] can't always be explained by simple rules and measures," Nadorshin offered. "You need a psychologist more than an economist to explain the situation today."