The price of oil is also trading better today. Brent crude for October delivery is at $78.26 p/bbl this morning, albeit the discount to the equivalent WTI contract is widening. That contract last traded at $74.71 p/bbl as storage in Cushing, Oklahoma again reaches near capacity. The delayed weekly US Energy Dept oil inventory report will be published today and OPEC is expected to release its review of oil demand and supply trends. Both usually have an impact on where oil trades and, by extension, on sentiment towards Russia.

The dollar continues to edge higher against the euro and is at $1.2698 currently. The yen is also better against both currencies and last traded at 83.66 against the dollar. Gold remains flat today at $1,257.8 per ounce.

Moscow’s bourses should open a little better today, buoyed by the positive trend in global markets. Opening gains should remain slight, however, as investor fears are far from appeased. The ruble is set for a better session today. The higher price of oil, gains in Asia’s developing market currencies and the generally better mood in global markets should help the currency reverse some of yesterday’s loss against the US dollar.

Polymetal had a strong move in both Moscow and London yesterday but on thin volume. That stock is worth paying close attention to today. Surgutneftegaz is in talks to sell its stake in MOL and that may soon trigger speculation as to what it may do with the cash. A dividend increase is unlikely but speculation may again focus on a possible link with Rosneft. Purely speculative of course.

Potential banana skins. Today will be busier in terms of economic news flow that investors pay attention to. In the US, the weekly jobless claims report will be published along with the latest trade balance. In the EU, the ECB will publish its September monthly report and will comment on how it sees economic growth and solvency risk. More than a few banana skins in that list while, if numbers are positive, market sentiment could improve significantly. In Russia, the Global Policy Forum in Yaroslavl will generate some headlines as senior officials talk about the country’s modernization programme. Veropharm will report 2nd Qtr numbers. 2nd tier consumer electronics retailer, M.Video (MVAD N/R) will be stronger at the opening after it announced a share buy-back at $7.0 p/s after the market closed yesterday. The closing spread was $6.25 - $6.55.

Fitch upgrade. Ratings agency Fitch upgraded the outlook for Russian credit risk to positive from stable yesterday. The rating remains at BBB, the agency’s 2nd lowest investment grade. That puts Russia on par with countries like Hungary and Thailand according to reports. This despite the fact that Russia’s FX reserves are almost $450 bln while those of the other two countries are at $44 bln and $146 bln respectively. Hungary is expected to grow GDP by only 1.0% this year, to run a current account deficit of 0.4% of GDP and has an unemployment rate of 11.0%. Having Russia on a comparable rating is simply not logical. A full ratings upgrade is quite evidently way overdue from all of the ratings agencies.

Global Policy Forum. The second annual Global Policy Forum will take place in the city of Yaroslavl (North East from Moscow) today and tomorrow. The theme this year is “The Modern State: Standards of Democracy and Criteria of Efficiency.” In practical terms, the agenda will be about creating an efficient economy and how to pursue the ambitions of President Medvedev’s modernization agenda. Creating an I.T. and so-called knowledge based economy will be headline subjects. President Medvedev will deliver the keynote address. The forum is expected to attract up to 500 delegates from 20 countries, and will also feature an address by the Korean Prime Minister.

Scrambled eggs. There was quite a lot of economic commentary in Russia yesterday. None of which was surprising but all of which at least confirmed the improving trend across the economy. Inflation gained 0.2% for the past week, bringing the year to date rise to 5.6% and that keeps the full year trend on track for 7.5%. Food prices were again the biggest factor and investors rightly fear that this pressure will increase in the autumn. We have been saying for some months, i.e. before the drought effect added to pressure, that inflation is the government’s number 1 priority and it will take whatever action is possible to keep prices – both inside an outside of the basket – as low as possible this year and next. That has already hurt the regulated utilities and will very likely lead to margin pressure in the food producer and retailing sectors, in pharmaceuticals and for fuel product producers.

Yellow Lada road trip. The Federal Statistics Service revised GDP growth for the 1st Qtr of this year from 2.9% to 3.1%. The Customs Dept published the trade statistics for the first seven months of the year and reported a trade surplus of $105.5 bln, or $40.5 bln better than for the same period last year. Prime Minister Putin told a cabinet meeting that the government expects GDP growth of at least 4.0% in 2011; real income to rise 3.6% and investment spending to rise 10.0%. That last number is the most critical as investment spending so far in 2010 is much lower than is needed to sustain economic growth. Finally, the Association of European Business reported that the sales of new vehicles in August were up 51% year on year (at 168,637) and the year to date number (1.14 milion units) is 14% better than at the same period in 2009. Lada models were top four best selling in August with sales of the best model rising 195% YoY. The continuing cash-for-clunkers programme, aimed specifically at these models, and Prime Minister Putin’s Siberian road trip (in a yellow Lada) boosted demand.

Banks up with Fitch. Moscow’s bourses continue to follow the global markets direction, albeit with more volatility. Yesterday was such a day with the better performance of US and European markets resulting in a near 1.7% gain for MICEX. It closed above 1,400 at 1,422.1. The RTS, restrained by a weaker ruble-dollar rate, closed 1.0% better at 1,468.1. The banks were the best performers on the local bourses, at least partly because of the upgrade by ratings agency Fitch of Russia’s credit outlook from stable to positive. Sberbank added 2.8% and VTB gained 2.3% on MICEX. Polymetal was the best performing local share with a gain of 8.1%. AvtoVaz Prefs jumped 7.9% while the common shares ended down 1.2% despite strong gains in its vehicle sales reported for August.

Ruble fell again. The ruble again traded with the dollar-euro market and hardly reacted to the Fitch ratings upgrade or the general improvement in investor risk appetite. Despite the rising level of inflation in Russia, the government has consistently made it clear that maintaining low interest rates is a key part of its economic policy for 2011. The dollar rallied to $1.274 against the euro by the close of trade on MICEX and that resulted in a session loss of 13.7 basis points for the ruble against the US currency. It closed at 30.911. The gain against the euro was much more modest, closing up 5 basis points at 39.248.

Steel names lead in London and NY.The London GDR market was also active, led by the usual high-beta steel names. They rose partly because of the better sentiment in global markets and partly because of higher steel prices. Novolipetsk led the sector with a gain of 3.3% after it announced the commissioning of a new furnace. Other sector names also closed higher by at least 2.0% each. Novatek was a strong performer, rising 4.7% to $77.5. Polymetal was also the best performing name in the GDR market, closing 5.7% better. The IOB Index ended the session with a gain of 1.4%.

Chris Weafer is the Chief Strategist for Uralsib Group