“History is that certainty produced at a point where the imperfections of memory meet the inadequacies of documentation”
Patrick Lagrange (French historian)
Economic weakness is the dominant concern for Russia. The headlines from Russia are dominated by two issues currently; the rapprochement between Russia and Ukraine and the still weakening domestic economy. In terms of possible market impact the former is potentially very significant for the longer term, especially if Ukraine were to move further and start talks to join the customs union. The latter is of much more immediate concern and unless reversed the weak macro data will soon lead to a scaling back of domestic earnings growth assumptions. That would hurt sentiment towards many of the domestic economy equity market themes and add more pressure on the ruble.
The Iranian deal may impact oil later next year. The international headlines are today dominated with the deal between Iran and the UN to curtail the country’s nuclear programme. That news knocked almost $2.5 p/bbl off the price of Brent in early Monday trading and adds to concern that further, more significant, price weakness may deteriorate Russia’s budget execution in 2014 and add further downward pressure on the ruble.
Friends reunited. It is case of “friends reunited” for Kiev and Moscow, for former Finance Minister Alexey Kudrin (he has been brought back into a formal Kremlin advisory role – see below) and now for Tehran and the UN. The investment implications for all three have been factored into our 2014 macro forecast assumptions and are reviewed in more detail below.
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