Positive call: how the stock market and the ruble react to negotiations and sanctions

The Russian stock and currency markets reacted to the telephone conversation between Vladimir Putin and Donald Trump with restrained optimism. At the same time, despite the adoption of a new package of sanctions, the quotes did not fall. On May 20, the national currency came close to the highs of recent months — 80 rubles/ $. The Moscow Exchange index has been fixed at around 2,850 points, around which it has been trading for the last month. In the near future, investors' attention will shift from geopolitics to the Central Bank's decisions on the key rate: it is expected that it will be lowered in the summer. Then the ruble will trade around 85 rubles/$, and the Moscow Exchange index will be able to jump above 3,000 points again. The positive and negative scenarios of analysts are described in the Izvestia article.

How did the markets react to the phone conversation between Putin and Trump

Russian President Vladimir Putin held another telephone conversation with his American counterpart Donald Trump on the evening of May 19, Moscow time. The conversation lasted more than two hours. The main topic was the resolution of the Ukrainian conflict.

Following the conversation, the Russian side declared its readiness to start work on a future peace agreement, Vladimir Putin said. After that, Vladimir Zelensky allowed the signing of a memorandum between the Russian Federation and Ukraine, which will lead to an agreement on ending the conflict. According to him, Kiev will be waiting for the Russian version of the document. Donald Trump, in turn, said that Russia and Ukraine would soon begin negotiations on a cease-fire and conflict, and the Vatican could accept them.

On May 20, the markets reacted to the phone calls with a positive but restrained response. In the morning, the ruble strengthened on the interbank market, falling below 80 rubles/$, but then returned above this mark — it has been trading near it since the beginning of May. The Moscow Exchange index dropped slightly the day after the bell, to 2,850 p. However, the quotes have been close to this value for the last month.

The stock and currency market indicators did not roll back even after the European Union announced the 17th package of sanctions on May 20. About 200 ships that are linked to the Russian Federation in Brussels will fall under the new restrictions. This, as expected in the West, should make it difficult to trade Russian energy resources. At the same time, Trump said that the United States would not introduce new financial and economic measures against Russia yet.

The positive side of the negotiations is convincing enough to outweigh the effect of the 17th package of sanctions, experts interviewed by Izvestia believe.

"The reaction of the markets turned out to be rather restrained, since the very fact of the ongoing dialogue between the Russian Federation and the United States inspires optimism, but the lack of progress does not negate the risks of disrupting negotiations," explained Vladimir Evstifeev, head of Zenit Bank's analytical department.

He stressed that right now, geopolitics still determines the main sentiment in the local financial market. The future dynamics of the ruble and exchange-traded assets depend on its outcome.

— In a positive scenario, it is worth considering the likelihood of an end to the conflict in the coming months, which is likely to raise the Moscow Exchange index to the level of 3,200 points and above. Disruption of negotiations and increased military activity may lead the index to medium—term lows of 2,300-2,400 points," predicted Vladimir Evstifeev.

The market will remain emotional and will move in the range of 2,800-3,000 points, depending on the alternation of positive and negative news after the negotiations, Kirill Komarov, head of the investment advisory department at T-Investments, believes. However, the indices will be influenced not only by geopolitics.

What will happen to the dollar exchange rate in 2025

Alexander Bakhtin, an investment strategist at Garda Capital, believes that the strong ruble remains one of the obstacles to the growth of stocks. The higher the exchange rate, the less the exporters earn in ruble terms. As a result, the quotations of their securities decrease, and they make up a significant part of the Moscow Exchange index.

— Now the national currency draws strength more from the approach of the peak of the tax period than from the geopolitical situation. Companies are selling more foreign currency in preparation for fiscal payments. This increases the overhang of its supply in the market, while the demand for foreign money remains subdued," Alexander Bakhtin explained.

The attention of investors in the stock and foreign exchange markets will shift from geopolitics to the monetary cycle in the near future, Mikhail Zeltser, an expert on the stock market at BCS World of Investments, expects. The lower the key value, the less attractive ruble assets are compared to foreign currency assets for individuals and companies. In addition, cheaper loans will allow Russians to return to buying foreign equipment, which will increase demand for imports.

An extremely important fork will be the next meeting of the Central Bank, which may shift the focus from geopolitics to macroeconomics and add positivity to the market in the event of a rate cut, Kirill Komarov from T-Investments agrees. As Izvestia reported earlier, the financial market expects that the Bank of Russia may begin easing monetary policy as early as July.

In addition, oil prices on the world market are likely to continue to recover — Brent may reach $70 per barrel, Mikhail Zeltser added.

— According to our expectations, the ruble will begin to retreat from its highs after the May tax period. The dollar may reach 85 rubles in the next month, the euro may reach 95 rubles, and the yuan may reach 11.3—11.5 rubles," Alexander Bakhtin expects.

According to him, not only the expected gradual reduction of the Central Bank's key rate and the restoration of imports, but also seasonal demand from those traveling abroad can play against the national currency.