Premarket Stocks: Russia Breaks Market Rules Left and Right

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

And here’s why: the Russian stock market does not work according to the usual rules. The central bank banned foreign investors from selling their shares and prohibited short selling. Only 33 shares were admitted to trading on Thursday.

Context: In the first half of 2021, foreign funds owned more than 80% of the shares traded on the Moscow Exchange, according to Reuters. The US and Canada accounted for 54% of the total, 22% for the UK and 21% for the rest of Europe.

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

“Russia has made it clear that it is going to invest public resources to artificially prop up shares of traded companies,” Deputy National Security Adviser Duleep Singh said in a rare White House statement about another country’s financial markets.

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

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

This will not please countries and companies that have contracts that stipulate that they will pay for gas in euros or US dollars. The German government said that any requirement to pay for gas in rubles would constitute a breach of contract.

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

This is not the first time that Moscow has offered to abandon its financial obligations. Earlier this month, Russian Finance Minister Anton Siluanov said that Moscow would pay creditors from “unfriendly countries” in rubles until sanctions were lifted, even if the contracts call for payment in dollars.

The Big Picture: Rating agencies have responded to Moscow’s apparent willingness to defy the rules by downgrading the country’s debt rating. Fitch warned that a default was “inevitable”.

Analysts say the ban on the sale of shares by foreign investors and attempts to rewrite contracts will further isolate Russia.

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

Good news for the economy can be found in these stocks

Here’s a promising signal from Wall Street: Transportation stocks are leading the market this year. This could bode well for the economy as a whole, says my CNN Business colleague Paul R. La Monica.

The Dow Jones Transportation Average, a group of 20 stocks that includes major railroads, freight forwarders, airlines and trucking companies, is up about 7% this month and hasn’t changed in a year.

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

When the Dow Jones Transportation Index outperforms the rest of the market, it is often seen as a positive macroeconomic indicator.

This means that consumers are buying a lot of products from Amazon and Walmart that need to be delivered to warehouses and stores. And it’s a sign that people are traveling again, both for leisure and business.

Car rental company Avis Budget, railroad company Union Pacific, trucking company JB Hunt, and Alaska Air, Southwest and JetBlue are among the best transportation companies this year.

The rise in vehicle inventories is even more pronounced given rising energy prices. Oil soared more than 50% to around $115 a barrel in the United States.

Of course, potential problems in the sector remain. These include supply chain issues, a shortage of trucker labor and the consequent need for higher wages, and the recent spike in Covid cases.

Stock memes are back

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

GameStop shares rose over 30% on Tuesday and another 16% on Wednesday. AMC soared 15% on Tuesday and gained 20% on Wednesday.

GameStop surged after company chairman Ryan Cohen, co-founder of online pet store Chewy, bought another 100,000 shares. “I put my money into my words,” he tweeted on Tuesday. Its RC Ventures now owns 9.1 million shares, representing an 11.9% stake in the retailer.

Cohen hopes to turn GameStop around with investments in NFTs and other cryptocurrency and blockchain initiatives. He brought in two former Amazon executives as the new CEO and chief financial officer.

AMC is also benefiting from some management chatter on Twitter.

Cinema chain CEO Adam Aron tweeted Tuesday about his excitement about upcoming spring and summer films and defended the company’s purchase of more than a 20% stake in mining company Hycroft.

– So funny. Small-minded people call our investment in Highcroft… “stupid”… “stupid”. AMC understands how to raise cash and stretch debt,” Aron wrote, referring to his company’s recent refinancing plans.

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

Both GameStop and AMC have fallen this year along with the wider market. AMC shares are still down nearly 20% in 2022, despite gaining nearly 45% in the past five days. GameStop shares are down about 3% this year, even after they soared 65% last week.

Next

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

Also today:

  • US jobless claims at 8:30 am ET.
  • EIA data on natural gas reserves

Tomorrow: Expected US Home Sales and Consumer Sentiment from the University of Michigan.

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