> US banks and China to take headlines tomorrow. The other big news story this week is expected to be the results from the big Wall Street banks. After JPMorgan Chase issued disappointing numbers on Friday, the figures from the other big banks will need to be a lot better to avoid undermining confidence in the US recovery. China will issue its December macro report early tomorrow morning, with the consensus expecting a small reduction in growth indicators from those of the previous month.

> External fears push the risk switch to "off". For the Russian market, the theme as the week starts will be "risk-off", with stocks and themes bearing greatest exposure to the global economy likely to be under the most pressure. The banks are also part of that high-beta trade, and this week Sberbank and VTB will reflect the global sector reaction to the Wall Street bank numbers, the rising systemic risk in the European banking sector and, very likely, some early weakness in the ruble as a reaction to the lower oil price. Two specific defensive themes to look at this week are domestic retailers and gold producers. The retailers performed well last week after Magnit's (BUY) numbers, and this week X5 Retail Group (BUY), O'Key (N/R) and M.Video (BUY) will publish their trading updates.

> Traders increasing gold bets. A Bloomberg survey shows that gold traders have turned the most bullish in two months after it was reported that China imported its biggest ever volume of gold - 102.8 tonnes in November alone - and US investors have been buying gold coins in increasing numbers. Eighteen of the 23 traders surveyed expect the price to rise this week. COMEX data show that an increasing number of July call options for $2,200/oz are being bought, while traders are also making fewer bets against the SPDR Gold Trust, the biggest gold ETF, than at any time in the past 20 months. Technical traders also like the prospects for gold. The price of gold peaked at $1,891.9/oz in late August before falling almost 20% and through its 200-day moving average. Last week the price moved back above the 200-day moving average as it gained 0.9% for the week to finish Friday at $1,630.8/oz. We like Petropavlovsk (59% upside from target price), Polymetal (49% upside) and Highland Gold (35% upside).

> Oil may come under more pressure. The price of Brent fell 2.3% last week to finish Friday at $110.44/bbl. The move partly reflects the heightened concern that Europe's problems will worsen and force a lowering of growth expectations in major economies. Partly the slide was a reaction to the news that Europe may delay imposing the proposed tougher sanctions against Iran. The worsening security situation and spreading oil strike in Nigeria is providing something of a cushion against price weakness. It will be that combination of news that will again have the most influence on where oil trades this week. The Chinese Premier is visiting Saudi Arabia and several other Gulf oil states this week, and any new agreements, e.g. to further isolate Iranian oil exports to China, may provoke a response from Tehran. Without that, or a worsening of the news flow from Nigeria, the price of Brent may slip several more dollars per barrel over the short term. That would weaken the ruble (up 1.0% against the dollar and 0.7% against the euro last week) and hit the shares of major oil producers.

POLITICS UPDATE

> Deadline to qualify for presidential poll this week. Candidates in the March 4 presidential poll have until 6 pm on Wednesday to validate their candidacy with the required 2 mln signatures. To date, the candidates that were nominated by the four parties represented in the Duma (i.e. and therefore did not need to submit the signatures) have been registered. These are Prime Minister Vladimir Putin, Gennady Zyuganov of the Communist Party, Vladimir Zhirinovsky of LDPR and Sergei Mironov of A Just Russia. The campaign team for Mikhail Prokhorov said over the weekend that he has now collected the required signatures. The most recent poll by the independent Levada-Center showed that Putin would get a 42% share of the vote if the election were to be held now. The state-run VTsIOM put that number at 48%. Putin needs at least 50% to avoid a run-off with the nearest challenger. Zyuganov would be runner-up based on the current polls with a 10% share of the vote. Prokhorov would get a 3% share of the vote if polling took place now according to the VTsIOM survey.

Chris Weafer, Chief Strategist Troika Dialogue