Analysis

An interruption in publications due to the author’s summer vacation has come to its end and we have to admit that the worst expectations are coming true to life. This mainly concerns foreign stock markets, with which the Russian market has a closer connection than expected.

As expected, the US Federal Reserve System did not change the rate, and nothing was unexpected in the accompanying statement. Market participants are anxious about the future, which is evidenced by the growth of gold and crude oil prices.

The market is waiting for the US FRS decision on the rates, which will be made public at 10.15 p.m. Moscow time. Stock markets are feverish. The currency market however is calm.

A correction, the necessity for which was stated in the last summary, is in full swing. The falling rates are accounted for by the events in the foreign markets, where sales brought about testing of important levels.

The referendum in Ireland has led to the collapse of the Lisbon agreement, which was reflected in the market quotes for euro and share indices in Europe. The decrease on the European floors ahs started even earlier – in the last decade of May. The German DAX is trading at around 6570 points, and the British FTSE – at 5780 points.

The market challenged the intention of the American financial authorities to increase the interest rates. The US dollar growth stopped abruptly. From the Friday lows of 1.53 the Euro went up by 250 points to 1.5550 and the pound went up by 290 points from 1.9410 to 1.9700.

After a long holiday weekend the Russian market opened with a growth. There were gaps for a number of blue chips, which were closed by the market in the afternoon.

A correction in the gold and oil markets has not yet resulted in breaking the main trend. Brent oil is being traded at 126.30 dollars per barrel, gold – 890 dollars per troy ounce. Economic statistics has not yet presented a clear picture of the American economy future.

The dollar strengthening has not continued and the main currency pairs are still being traded in wide ranges. Today is a day off for the USA and Great Britain markets, thus the amount of trading will be low.

A rapid growth mentioned in the previous summary took place in the first days of May. Today a new record has been set – the RTS Index reached 2,498 points.

Brent oil price is currently over 125.85 dollars per barrel. Such an impressive rise (the strongest weekly growth for the year) is accounted for by reduction of supplies from Nigeria prior to the vacation season.

The decision by the US FRS to reduce the interest rate by 25 basic points resulted in massive purchases of the dollar against the Euro, yen and the Swiss franc. On Friday both the ECB and the Bank of England are expected to leave their rates unchanged.

The approaching holidays make the players “choose money". Caution over risk – this approach is reasonable prior to publication of important statistical data on the US economy and a resolution by the FRC on the interest rates.

The further oil quotations’ rise is becoming rampant – the price has almost reached the level of 120 USD per barrel, which forced the European Commission to increase the inflation forecast to 3.6 %.

Euro reached a new historical peak of 1.6020 dollar-mark, then the profit taking began, and the currency rate rolled more than 450 points away – to 1.5560.

The 2,150 level of the RTS Index, which was indicated in the last summary as a goal, was reached and passed due to the massive purchases of blue chip stocks. The high was on Monday at 2190.50 points, afterwards a correction took the sideways trend.

The continuing decline of the dollar, write-offs of the major banks due to the American mortgage crisis, the increasing crude oil prices – these topics remain the same in spite of an interruption in the summary publications.

An interruption in the publication of summaries due to the author’s illness did not, however, result in our missing interesting events in the market. The Euro is being traded in the flat in spite of the technical analysis and statements of the finance ministers of G7 that the following weakening of the dollar is unacceptable.

The RTS Index continued to grow, having reached the 2,120 points mark. As the western stock indexes are going down, this trend looks promising.

The European indexes grew after Easter. The same holds true for the American indexes. The Dow Jones Index got up to 12,600 points.

The statistics on the American economy does not add optimism to the investors. The dollar has started falling again after the long Easter weekend.

The decline to 1,946 points on the RTS Index may be considered completed.

A dull flat in view of the foreign negative background resulted in a sharp break through by the RTS Index of the 2,000 points level and rebound to 1,970 points. The trading within a narrow range of 2,000 – 2,080 points is the most optimistic forecast for the Russian market.

The reduction of the rates by the USA FRB by 0.75% had a reverse effect. The dollar, which was rapidly falling, has started growing.

The reduction of the rates by the USA FRB by 75 basis points has not resulted in a further weakening of the dollar.

Panic is starting to reign in the stock markets.

The ongoing dollar fall on the whole range of financial instruments has a negative influence on the world economy. However, understanding that noting can be done, the European leaders are careful in their statements.

With a low at 2,006.86 points the RTS Index grew to 2,059 points. The turn started even before the publication of the US economic statistics.

The European and American stock indexes started the week with a decline.

The US dollar fall against the major world currencies strengthened last week. It was mostly reflected in the commodity markets, where the crude oil price got over the psychologically important mark of 100 dollars per barrel. In view of the FRB Chairman B. Bernanke statement on continuation of the monetary policy weakening, panic was reining in the markets. It has become obvious that the USA is going to solve their problems at others expense. Gradually the problems are starting to appear in Europe, but it is going to have the strongest effect on the developing markets.

The decline of the foreign stock markets has significantly affected the Russian stock market.

The last week was marked with an important event - the Euro broke through 1.50 and soared to new heights. The growth is continuing without significant rebounds or corrections, which indicates that major players are supporting the trend.

The European and American stock indexes are being traded up. Except for the coming initial offering by VISA, which is going to be the largest in the history of the stock market, 19 billion dollars, no other significant events are expected to occur.

The Russian stock market has overcome the negative January tendencies and closed at 2079.72 points on the RTS Index.

A sharp turn in the Euro rate on Wednesday, February 20th, resulted in an increase of the rate from 1.4615 to 1.4864 on Friday. The correction has not yet resulted in support default for 1.4780. Moreover, the “double bottom” established at such level resulted in the renewal of purchases and growth to 1.4850. The signals at the inter-day periods support the possibility of retesting 1.4864 and upon achievement of this level – movement to 1.4910. The daily graphs show the sideways trend with wide limits of 1.4310-1.4950. The main attention is directed to the news from the USA and there is going to be enough of those till the end of the month, including the speech of B.Bernanke in the Senate scheduled on Thursday, February 28th. A turn may start at the end of the week, on Thursday or Friday. Before that the purchases start from 1.4760-80 and 1.4805. The sales start from 1.4920-50 with the stacks over 1.50 to be added upon achieving 1.4780. The British pound has also experienced a turn going from 1.9360 to 1.9710 without decreasing. The daily and weekly graphs also show turn signals and in case until the beginning of March the rate is not corrected to at least 1.9550, the growth to 1.9950 is possible. The Canadian dollar, as mentioned above, was approaching 1.0200. On Wednesday, February 20th, this level was finally achieved. After that the prices tended to the lower limit of 0.9950, with the support of 0.9920, 0.9875. There exists a risk of downward movement with the goals of 0.9750, 0.9710 and lower. The Japanese yen reached the upper range limit of 108.40. Thereafter there was an attempt to return to the earlier rate. A low of 106.75 was reported, but the attempt failed and the rate has been moving in the sideways channel within the range of 107.25-108.50. In the near future the attempts to reach 109 yen per dollar are expected. In the second half of February the dollar significantly decreased. If that results in overcoming the important barrier of 1.50 Euro per dollar, remains to be seen. So far we can expect a correction in early March and continuation of the sideways trend. In the mid-term perspective the dollar may strengthen not through the USA economic successes, but through the political situation in the country, i.e. presidential pre-election campaigns. Russian Stock Market Summary for the week of February 18th - 22nd, 2008. The Russian stock market has overcome the negative January tendencies and closed at 2079.72 points on the RTS Index.

The stock indexes of the major stock markets after decline in the first half of February showed growth, which cannot be considered stable.

The growth of the first echelon shares turned into a correction on Friday due to profit taking. The RTS Index closed below 2,000 points at 1989.25 points.

The sideways trend in the basic currency pairs shows uncertainty in the market moods as of the further dollar development.

The “blue chips” growth started on Monday morning. There was no news from abroad so the players started to carefully fill their portfolios.

The USA FRB reduced the rates by 0.5%, which was welcomed in the stock but not in the currency market. The dollar tested the lows with Euro and gradually started strengthening.

The Central Bank of Russia raised its refinancing rate by 0.25%. It now comprises 10.25% per annum. Remembering the fact that inflation last year was out of control, these actions are delayed. Russian banks have liquidity problems, but the Central Bank did not follow the example of the FRB of the USA and help them through inflation increase.

The shock from the FRB actions is gradually fading away. The sharp rate drop by 1.25% within eight days resulted in a rapid growth of the stock indexes, but it’s taken with less and less enthusiasm.

The shock from the FRB actions is gradually fading away. The sharp rate drop by 1.25% within eight days resulted in a rapid growth of the stock indexes, but it’s taken with less and less enthusiasm.

The beginning of the week started with another fall. After an optimistic close on Friday higher than 2,000 points on the RTS Index, on Monday the Russian shares were trending lower. This time the decline was not as massive as last week. The RTS Index fell by “only” 2.86%, Gazprom – by 3.45%, Surgutneftegas – by 4.73%, Nornickel – by 3.49%.

The beginning of the week started with another fall. After an optimistic close on Friday higher than 2,000 points on the RTS Index, on Monday the Russian shares were trending lower. This time the decline was not as massive as last week. The RTS Index fell by “only” 2.86%, Gazprom – by 3.45%, Surgutneftegas – by 4.73%, Nornickel – by 3.49%.

On Tuesday at an extraordinary meeting the USA FRB reduced the accounting and discount rates by 75 interest points. The rumors about that started spreading five and a half hours before the actual announcement. Based on such rumours, the dollar started to fall rapidly. At 11 a.m. Moscow time the fall in comparison with Euro and pound comprised almost 300 points.

The previous summary stated a possibility of correction both for the RTS Index and a number of shares. It was hard to suggest that it was going to be so significant. Currently the decline on the RTS is over 12%. The “double peak” figure coupled with investors’ concern of the credit crisis and the USA recession resulted in massive sales of the Russian stocks. The fall of the world crude oil prices reduced the rates of oil and gas companies. The market fall is continuing for the fifth session in a row and is considered extreme. In case the support around 2,060 - 2,075 points gives in under the sellers’' pressure, the levels of 2, 020 and 2, 000 may be attractive for buyers. It’s not likely that the break through the psychologically important level of 2,000 points will happen immediately. A false entry to 1,980 points is possible with the further return.

Since the beginning of the new year the negative information on the US housing market has increased the investors’ concern in connection with apparent signs of the coming recession.

The RTS Index closed at the end of the year at 2,290 points, which is slightly higher than the 38% correction from the trend of 2,128 -2,360 points. In January the Index again exceeded the level of 2,300 points and started a gradual growth. The nearest goals are 2,370 and 2,420 points.

From December 20th and to the Orthodox Christmas the bidding took place on very limited volumes, which explains the holiday break in forecasts and reviews.

The federal fund rates have been reduced by 0.25%. The discount rate underwent the same reduction.

The correction followed after the FRB decision to lower the rates by 0.25%, which was negatively accepted by the world markets. The situation unfolded rapidly. On the political news the Russian stock market has risen significantly, but on the economic - it has been falling for three sessions in a row. On the one hand, profit taking was expected for a number of overheated stocks (Rostelecom, Gazprom) and on the RTS Index as a whole. On the other hand, it’s too early to talk about the trend ending. By the end of the year the highs are not likely to be exceeded. At best there will be a false entry to 2,300 on the RTS Index with its further return.

The USA federal fund rates as well as the discount rate were reduced by 0.25%.

There has been three major news items on the substandard mortgage crisis.

We would like to suggest that you again return to the previous summary. Almost all the goals stated therein have been achieved by the market. The RTS Index, as expected, broke through 2, 300 points and achieved 2, 323 points (the predicted rate was 2, 320).

As it was mentioned in a number of previous summaries, the Bank of England has finally decided to reduce the rate by 0.25%. The market reacted to this not by a continuation of the pound weakening but by a correction from 2.0180 to2.0430. The ECB left the rate unchanged and now all attention is turned to the scheduled Tuesday meeting of the USA FRB. At the same time, the lowering of the rates is expected in the market, which results in an increase of the Euro to 1.4690. There are no special prerequisites for its decline.

The uncertainty in most markets is growing. Gold has sharply gone down to 800 dollars per ounce with the low of 777 dollars per ounce. Silver has gone down from 15 dollars and is being traded in a narrow rising channel from 13.95 to 14.36 dollars per ounce. The starting correction for the dollar has stopped. The Euro will again go up from the low of 1.4620. The pair is being traded at 1.4770, which is the key resistance level. The pound rose from the lows on Monday and since Friday has been ahead of the Euro in its upward movement to 2.0680. It is a quite rare moment when the two leading European currencies are being traded in different trends. The pound showed its high yesterday and is already being corrected. Today the euro has caught up with its colleague.

The market preserves positive dynamics. The repeated testing of the highs by the RTS index is likely to happen in the first half of December.

The last week of November clearly marked the beginning of US dollar correction. In pairs with the Swiss franc, the Canadian dollar, the pound and the Euro the dollar got back a significant part of its losses suffered in the fall. Friday was marked by strong sales of the Euro, which led to the breakthrough of the key levels of 1.4715 and 1.4660. The pound rapidly reached 2.0536, but its further growth was limited by a turn in the Euro-pound cross. As a result the Euro continued to fall all Friday evening and the pound strengthened after bouncing from the lows to 2.0590. The Swiss franc, which was steadily strengthening over the six previous months, turned sharply and within six days went from 1.0890 to 1.1326.

The short week connected with the celebration of Thanksgiving in the USA did not bring substantial changes in the current situation. The crude oil prices continued to grow. A barrel costs almost 100 dollars. Gold also became more expensive. The prices have reached 830 dollars per ounce. Silver is lagging behind and is being traded below the important level of 15 dollars per ounce at 14.70 dollars per ounce.

The Euro has approached the rate of 1.50 with the night high of 1.4966. This happened during the Asian session on the eve of Thanksgiving. The pound, although varied following the Euro trend, did not rise above 2.0770, after which it fell down by 250 points to 2.0520. The Euro was corrected to 1.4780, but these trends took place in the thin market during American holidays.

The two previous summaries quite accurately described the events of the past days. The RTS Index turned at about 2, 120 points (the low was 2,128points). The surprising news in relation to Nornickel, which we expected a week ago, finally happened, Rusal is planning to buy the share of M. Prokhorov. The further events will depend on the actions of another shareholder - V.Potanin, which still preserves the control over the most important world producer of nickel.

The continuation of the financial crisis connected with the mortgage bonds affected the largest bank conglomeration City Group, whose shares has recently received a negative rating. The collapse on all basic stock markets followed immediately.

In a crisis situation the market cannot form a steady trend. On the one hand, B.Bernanke, FRB Chairman, openly declares about the negative expectations with respect to the US economy but does not indicate the best rate reduction on December 11th. On the other hand, the US authorities declare about their adherence to the strong dollar policy, which clearly contradicts the reality. The wave of write-offs on the mortgage bonds seizes new victims and so far there is no "light at the end of the tunnel" as new details of the mortgage crisis become known. Apparently very few people are aware of what is happening and all news is quickly outdated.

The RTS Index is attempting to reach 2,150 points, and the current events are within the scenario, presented in the previous review. The decrease is caused, on the one hand, by the correction model, which was formed after the achievement of the highs around 2,300 points and, on the other hand, the lack of positive news from abroad keeps the rates from growing. The wave of the write-offs connected with the credit crisis continues, which puts the European indexes in the red.

So the correction, the necessity of which was stated by the analysts of our company, finally happened. However it occurred mostly because of the new fears connected with the mortgage crisis consequences. A sharp, almost perpendicular drop of the dollar on Tuesday night was perceived as a hysterical reaction of the market to the statements of Chinese authorities about the need for diversifying its foreign currency reserves, which was the topic of our special issue.

The profit taking on a wide variety of instruments - from gold and crude oil to the stock indexes and currencies, resulted in a temporary strengthening of the dollar, with exception of the dollar- yen rate. Gold tested the mark of 846 dollars per ounce, and under the sellers' pressure dropped to 797 dollars per ounce. Silver showed similar dynamics. After breaking through the last year’s price highs of 15.50 dollars per ounce, the rate reached a new high of 16.20 dollars per troy ounce, after which profit taking dropped the prices to 14.50 dollars per ounce. Oil contracts underwent correction as well - from 98 to 92 dollars per barrel.

Having shown the new historic high of 2,301 points, the RTS Index was corrected to 2,240 points, which looks as taking of the profit obtained within the last two and a half months of growth. The supports are on the levels of 2,220 and 2,285 points. We say that the decrease was also influenced by the renewal of panic connected with the mortgage crisis but this overseas influence was limited. In the future in case of similar news the Russian market reaction is not likely to be strong. It should also be noted that before the new-year rally, the goal of which is above 2,300 rubles, the market can go below the support level of 2, 185 rubles. Then the levels of 2, 155 and 2,120 may be turning.

Tonight the US dollar crashed to the new lows on the whole range of instruments. The Euro has broken through 1.46 and showed the new historical high at 1.4670. The pound reached 2.0950. The Canadian dollar broke through not only 0.93, but also 0.92, came close to 0.91 and was traded even below this level. The Swiss franc was strengthened to 1.1350. Gold gained in price to 839 dollars per ounce, silver - to 15.88 dollars per ounce, crude oil - to 98 dollars per barrel. However, it is still to say that the goals of the dollar bears have been achieved...

The expected aggressive reduction of the rates by the FRB did not happen. The reduction comprised the moderate 0.25%. Nevertheless, it proved to be sufficient for a new wave of the dollar sales on the whole range of instruments. Gold has already broken through the level of 820 dollars per ounce; the crude oil price reached the high values in 24 years - 96.24 dollars per barrel. The Euro is being traded above 1.45, and has already set the new historic record of 1.4560.

A wave of purchases in anticipation of the USA FRB resolution on the rates turned into a significant correction in most foreign stock markets. The resolution corresponded to moderate forecasts – a reduction by 0.25%, which seems to have disappointed investors. However, the growth potential still remains.

So the FRB has decreased the rate by 0.25%, as expected. After insignificant corrections the dollar continued a decrease against the Euro, the pound, the Swiss franc and the Canadian dollar. As expected, such actions of the USA monetary authorities will lead to a steady weakening of the dollar against all major currencies. The Canadian dollar is again an exception, which is constantly strengthening on the background of growing crude oil prices. The mark of 0.95 has already been passed, just like the level of 0.94. The level of 0.93 is the next to follow.

The last week was marked with new crude oil prices highs – over 90 dollars per barrel for WTI. Gold did not stay aside either. It has reached the level of 27-years ago- 795 dollars per ounce. Silver has finally broken through the level of 15 dollars, which has been holding it from trend development for a long time.

Last week the Russian market growth continued with optimism. The RTS Index was ready to break through 2,200 points. The next level was 2,250 points.

Our true forecast in the previous review once again confirm the correctness of our general approach to the analysis of the current situation. The dollar has been released for free falling, which will last for an indefinite time.

As stated in the previous summary, the pound had a sharp growth and reached 2.0525 on Friday trading and 2.0560 on Monday opening. The Euro was traded at 1.4350 and a strong correction is not yet expected. The Japanese yen has strengthened a lot. The night rate of the current week is 113.25. Carry trade transactions are being folded. The cross rate GBPJPY went down from 240 to 232.20.

Following the rise of the overseas stock markets, the RTS Index continued its rise, reaching new historic highs of 2,181. In general, this scenario fits in the framework of the previous summary. A correction to 2,133 occurred following the decline of the western indexes, which was based on the poor economic statistics for the USA and reporting data of major banks. The correction is expected to continue to 2.100 points.

So far there is nothing in the market, which could support the weakening US dollar. There are no fundamental statements, technical factors or official statements. Usually thats the time when the dollar starts growing, but even if that happens, the strengthening will be just a small correction and not a general trend turn.

The resolutions by the CEB and the Bank of England (to a lesser degree) to leave the rates without any changes provided support to both European stock markets and the RTS index, which has confidently passed the level of 2,000 points. The level of 2,161 is expected to be achieved this week. The only concerns are a high inflation rate in Russia and a possibility that the US rates will remain at the same level. However these factors will not have a strong influence on growth of the shares of the most Russian issuers due to a reigning optimism. By the end of the year the RTS Index may test 2, 232, 2, 300 and 2, 324 points, which will be followed by a strong correction.

As expected, the ECB and the Bank of England left the rates unchanged and Trichet’s comments did not contain any hints of a possible intervention due to a high Euro rate. The levels shown in the previous summary were confirmed by the market. The Euro rate went below the level of 1.4040 for only 9 points, and the breakthrough by the pound of 2.0370 resulted not only in testing of 2.0340 but to a false break through 2.0300. Friday information on the labor market in the USA (Non-Farm Payrolls) provokes strong movements in these pairs. As a result the Euro rate went to 1.4168 and the pound to 2.0441.

The information on the American labor market has shown an increase of work positions in August by 89 thousand instead of the reduction by 4 thousand announced earlier. 110 thousand work positions were created in September.

All stock indexes are rising. The dollar is falling. The situation with the USA economy is not clear, but the rate may be reduced once more by the end of the year. The speculative heat of the markets has increased. The Dow Jones Index reached a new record level of 111 points. Gold reached 747 dollars per ounce, crude oil – 84 dollars per barrel. The stock indexes of the developing countries and Russian have been growing.

Due to some delay our analysis and summary will cover not only the events of the last week but also the first two days of the present week.

During the whole last week the Euro was reaching higher and higher price records and approached the level of 1.43. Strong fluctuations in the cross rate pound-Euro have had little impact on the pound growth, which only on Friday soared by nearly 300 points - from 2.0195 to 2.0492. Then at the beginning of the current week testing of 38% correction level took place to 2.0370 and trading was within the range of 2.0450-2.0375. The pound seems to be striving to catch up with the Euro in reaching new heights against the dollar. The Euro went back to the bottom of the rising channel - 1.4138.

As expected, even one hint at a temporary break in the mortgage crisis has been sufficient for the Russian market to start growing with a doubled strength. The decision by the USD FRB to reduce the rates by 0.5 per cent encouraged growth in all stock markets of the world, including Russia. The leader was Nornickel, whose shares rose over the week by nearly one thousand rubles - from 5,740 to 6,555 rubles per share. With a 10% growth of nickel prices just within one session, such rapid growth is not surprising, but makes us wait for corrections.

The resolution by the USA FRB defined the trend of the main currency pairs. After reduction of the rates by 50 points, the dollar continued its decline against the Euro, pound, Swiss franc and Canadian dollar. The sideways trend is observed with the yen with the limits of 114-116.20. The macroeconomic consequences of these resolutions have already been defined by the market as negative for the dollar in the mid-term perspective. But the further Euro growth is also reasonably questioned even by the Europeans. N.Sarkozy, President of France, expressed his concern about the lack of actions by the CEB in the situation when the Euro is rapidly growing. Over a short period of time the Euro went up from 1.3360 to 1.4120, which can have a negative impact on the export-oriented European economy.

The events of Tuesday made all speculators happy. The FRB reduced the accounting and discount rate by 50 basis points. In spite of the repeated statements by B.Bernanke that the FRB does not see it as its goal to save the speculators, which assumed a too high risk, that was the goal of those harsh decision by the US financial authorities.

The Russian government resignation and approval of the new Prime-minister has not had a serious impact on the Russian or foreign markets, which have been trading in different directions in anticipation of the month's major events. The crude oil prices continued to grow in spite of the OPEC's decision to increase the limits by 500 thousand barrels per day. The price reached 80 dollars per barrel.

The Euro has reached new historic highs against the dollar – 1.3930. The pound though has stopped 300(!) away from its summer highs at 2.0364. The July high was 2.0655.

As suggested in the previous review, last week the Russian market traded in the narrow range of 1895 (1900) -1940 (1930) on the RTS Index. There was a speculative splash on Wednesday, which resulted in a short index growth to 1,957, but later the rate returned to the range mentioned earlier, thus confirming the validity of its limits, even upon the resignation of the Russian government. Gazprom shares are in the sideways trend, purchase from 260, sales from 270 rubles per share. Within the mid-term rising channel, the strategy of "buy on dips" appears to be most reasonable.

The labor market in the USA showed a sharp decrease in the number of new work positions, which has been seen as a possible beginning of the economic recession in the USA. The dollar has crashed to its 15-year-old lows against the basic currencies. Gold continued to grow to 707 dollars per ounce (see the summary from two weeks), the markets are waiting for the reduction of the basis rate.

Before publication of information on the American economy, the Russian market has been trading up. The RTS Index rose a little higher than 1,930 and hereafter remained at 1,900. Just after the publication of the USA labor market information, massive sales of the Russian shares occurred, which dropped the index from 1920 to 1895 points.

The information on the American labor market was shocking. The dollar fell below its 15-year low in comparison to the basic currency basket. This shows that the mortgage crisis started spreading from the financial sector to the real economy. So far the market interprets this in favor of the rate reduction at the nearest USA FRB meeting on September 18th. Thus the dollar falling may continue, though not so sharp.

The speech by B.Bernanke, FRB head, and President Bush provoked a sharp growth of the world stock indexes. However, there is no hope for a quick and painless solution to the mortgage crisis but the fact that the authorities will control the situation if the crisis spreads to the adjacent economic sectors, made most of market participants quite optimistic.

During last week the currencies were traded within the range in anticipation of the US monetary authorities’ action in relation to the mortgage crisis. On Friday B.Bernanke, FRB Chairman, and then President Bush gave speeches.

Favorable news contributed to the market growth. In the previous review we stated the importance of the RTS Index level of 1,880 and 1,920 points, which got its confirmation. The Russian stock market no longer reacts by a panic capital withdrawal to the difficulties abroad. A correction to 800 has already been excessive in view of all the negative information on the credit market.

The Central banks continued their efforts to support the liquidity, which prevent the crisis from developing. Moreover the markets were also supported by the data on new housing construction in the USA (+6%), which immediately provoked the bulls’ mood in the markets.

Although the concern about the sub-standard mortgage in the USA has subsided and quite good economic statistics has been published, the dollar could not keep the last week gains. A renewal of carry trade transactions made the cross rates GBPJPY and EURJPY grow by 1,600 and 1,000 points up to 235.60 and 159.70 correspondingly. This made the Euro go up to 1.3690 and the pound to 2.0200.

The Central banks continued their efforts to support the liquidity, which prevent the crisis from developing. Moreover the markets were also supported by the data on new housing construction in the USA (+6%), which immediately provoked the bulls’ mood in the markets.

All the levels indicate in the previous summary has been achieved and broken though. Gold was the only exception. It sill did not reach the level of 676 dollars per troy ounce. Volatility has become so high that some brokers had to double margin requirements for their clients.

The global financial market has not had a good week, and realizing that, the USA FRB reduced the discount rate by 0.5%, to 5.75% at an extraordinary, or better to say, emergency meeting on August 17th, Friday., This helped to normalize the situation at least for some time. The reaction of the major stock markets was instant. The US and European indexes went up.

The Russian stock market could not resist the abundance of negative information from the western market and became involved in the American mortgage crisis. The RTS Index on Friday reached 1798.43 points due to the investors’ fears of the negative scenario. At that moment a support came from abroad with a sudden resolution of the USA FRB to reduce the discount rate by 0.5% to 5.75%. The market liquidity returned to its standard amount and the RTS Index started an upward trend, following the rest of the western markets, and closed at 1,860 points.

The extreme volatility of the cross rates EURJPY and GBPJPY was the main topic last week. During two trading sessions on Thursday and Friday the rates difference was 500 and 800 points correspondingly, which indicates a dramatic folding of carry trade transactions, oriented for the interest rate difference. In conditions of the American high-risk mortgage crisis, which crashed the world stock markets, the dollar is continuously weakening against the Japanese yen, which provokes the reduction of the above-mentioned cross rates. The mid-term yen goal is 115.75, for the Euro-yen - 157.80, for the pound-yen – 232.70. It should be noted that as long as there is a significant difference in interest rates, there will always be enough people, who would want to earn on this difference, thus the renewal of carry trade transactions is possible, which will turn up the crosses, majors and the dollar-yen rate.

The RTS Index fell on Friday below 1,900 points. In the middle of the week the level of 2,000 has been tested, but it did not develop further. The events in the Russian market reflected the situation in the world - the crisis of the American mortgage market and reduction of crude oil prices.

World Financial markets for the week of August 6th – 10th, 2007. Only the interference of the central banks of Europe, USA and Japan prevented the world stock markets from a grandiose crash. The total amount of investments comprised over 300 billion dollars but the crisis has not yet been overcome.

The suggestion that the dollar is going to continue its weakening has been confirmed. The pound rose from 2.0180 early this week to 2.0458 on Friday. Particularly important was the break through by the franc of the critical level of 1.1970. Just after that the dollar dropped by a hundred more points. The Euro, yen and Canadian dollar have also strengthened.

The RTS Index has been lower than 2,000 points with the support around 1,930 points. The fact that upon the massive sale of stocks abroad our market underwent only a small correction, shows its actual potential and the long expected self-sufficiency.

The last week did not add assurance to investors and speculators in the bright future of the American economy. Following the Bear Sterns problems, the bankruptcies of mortgage companies have started. The concerns are connected with a possible chain bankruptcy reaction following the “domino principle".

The problems of the American housing market continue to cause fever in the stock markets of the USA, Europe and Asia. On Friday the Dow Jones Index fell down for over 500 points, which at the same time did not prevent strengthening of the dollar against the European currencies.

The previous summary served as a market action program, after working through which, the currencies froze waiting for the further events at the American real estate market and provocations by major players.

After renewing the high at the beginning of week, the RTS index fell from 2,092 by 1,942 points, having shown a strong correlation with the western stock markets. Foreign investors provoked a panicky wave of sales from the upper levels, fearing the negative information on the American housing market.

The RTS index achieved a new record of 2,086 points. The decrease started in the western markets has led to a correction in the Russian market. The support levels are at 2,050 and 2,020 points.

The dollar continued slow falling against the European currency, but now the American currency falling is supported and together with yen there have appeared steady signals of the 120.80 level testing. The crosses pound-yen and Euro-yen has moved from the highs 251 and 169 correspondingly.

The expected growth of gold prices above 680 dollars per ounce occurred almost simultaneously with the growth of nickel prices and, to a lesser degree, silver prices up to 13.35 dollars per o