Associated with the trump bubble burst in the Moscow markets

Financial markets send an interesting message about President trump and Russia. After the election trump investors seemed to bet that sanctions against Moscow will soon be weakened. However, this confidence evaporated at the end of January, and the quotations of Russian shares plummeted.

The numbers speak for themselves: from the 7th November (the day before the election) on 27 January, the MICEX index of leading Russian shares rose 26%. Index of Russian financial securities increased by 19% over the same period. However, this upward movement suddenly ceased, and prices had started to fall — as of Tuesday, the MICEX index decreased by 10.4% compared with the peak values in January and the financial performance decreased by 6.5%.

So what happened on January 27? After weeks of spreading negative stories about possible links between the members of the electoral headquarters of the trump and the new Russian President said at a press conference that is still “too early to talk” about lifting sanctions. As for the next day a telephone conversation with Russian President Vladimir Putin, trump said cautiously that he will see “what will happen”. And, according to representatives of both sides, the result of this conversation were only vague promises concerning cooperation in the fight against terrorism.

Economists argue about whether they make the markets the correction of expectations about policy, or are they closer to “random walk” (random walk). However, in this case the u-turn looked, in fact, very rational. Investors believe that change is possible, but then they decided that probably nothing will happen. A good summary of market expectations was an article in Bloomberg News, published on 20 December under the heading “trump paid off with Putin due to the easing of sanctions” (Trump Seen Paying Off for Putin with Sanctions Relief Coming). This article mentions carried out in the same month, a survey of economists in which 55% of respondents said that sanctions imposed on Russia after Russia’s invasion of Crimea, will be lifted in the next 12 months. And just two months before, when the polls predicted defeat trump, only 10% of respondents anticipated a quick lifting of sanctions.

The website of the TV channel Russia Today, which us intelligence believes the propaganda organ of the Kremlin, published on December 21 enthusiastic article in which reference was made held by the company Bloomberg poll, and it was suggested that “the election of Donald trump, is expected to cause fundamental changes in the foreign policy of the United States.”

Among the most active members of the support group actions trump, aimed at abolition of the sanctions, were the heads of Sberbank and VTB, the two largest Moscow-based banks, part of the assets of which is owned by the Russian government. Both of them are the target of U.S. sanctions that limit their ability to borrow money in the West or to transfer them there.

“I think Mr. trump should cancel sanctions against four major Russian banks, — said the head of VTB Andrey Kostin, whose words are contained in the material published on 19 January by the RT. — It would be very useful. (Sanctions) killed us… but, of course, to a very large extent made our future not as bright as we expected.” VTB Bank was mentioned in Panama of the dossier as an alleged tool of Putin’s money laundering, but such accusations are rejected by the Bank.

“Trump is the President of change, — said Herman Gref, head of Sberbank, December 28, in interview to the newspaper “Vedomosti”. “I have met with trump, and experience very positive, I know some members of his team,” said Gref, who was previously a close adviser to Putin (translation of the interview published by Newsweek magazine).

Gref, in fact, met with trump in November 2013, when the magnate was in Moscow during the contest “Miss universe”. Gref invited trump to a two-hour lunch in the Moscow restaurant Nobu. “From this meeting were good memories. He is a sane man.. and good to Russia”, — said Gref, in an interview published on 21 December on the Bloomberg News website.

Trump, apparently, left the same impression. Bloomberg quoted him a comment about this dinner in Moscow, which he made in conversation with the correspondent of the magazine Real Estate Weekly after returning to new York. “The Russian market shows an interest in me. Almost all the oligarchs were present in the hall.”

Russian banks, of course, was a disappointment to watch as the trump backs out of his promises about a quick easing of sanctions.

Sberbank shares, which increased in price by 35% between 4 November and 27 January, then fell by 3.4%. Listed in Britain, shares of VTB Bank, jumped in price by 20% due to the enthusiasm for trump, lost 4.5 percent after the January peak.

This kind of financial intrigue illustrate one little-known reason why is important the following questions: did the former national security Advisor, Michael Flynn with Russian Ambassador Sergei Kislyak on sanctions before the inauguration? Did any of the election team trump contact with Russian officials?

It matters not just reporters or critics of the trump in Congress. They have an impact on the markets. Ties with trump was seen initially as a success for Moscow, but now it no longer seems so significant.