Russia\u2019s industrial production rose 0.6% year on year in June, compared with a forecast increase of 0.1%. The outturn indicates a firmer reading than markets had pencilled in, following recent volatility in monthly indicators.<\/p>\n
The June figure adds to the latest run of official activity data used to gauge underlying momentum in the manufacturing, mining and utilities complex. The comparison between the 0.6% actual rise and the 0.1% expectation points to a wider-than-anticipated gap between projected and realised output growth for the month.<\/p>\n
We recommend that derivative traders prepare for a tighter monetary environment in Russia following the surprise 0.6% jump in June’s industrial output. This reading, which easily beat the 0.1% market expectation, suggests that domestic demand and manufacturing are still running hot. We expect the Bank of Russia to keep its key interest rate elevated to combat the resulting inflation, which historically pressures local bond and interest rate futures.<\/p>\n
For currency traders, we see this industrial resilience supporting the Ruble in the near term, particularly in the CNY\/RUB futures market which now dominates Russian currency trading. However, because payment bottlenecks and sanctions continue to restrict capital flows, we advise using tight stop-losses on any long Ruble derivatives. Historically, sudden regulatory changes in Russia have wiped out currency gains overnight, making short-term options a safer play.<\/p>\n
Lastly, we suggest focusing on equity index derivatives like the MOEX futures, which tend to benefit from strong domestic industrial activity. With manufacturing output showing unexpected momentum, industrial and materials stocks within the index could drive short-term upward swings. We believe buying short-term call options on the MOEX index is a viable strategy to capture this momentum while limiting downside risk.<\/p>\n\n\n\n