Bloomberg News

Russian Stocks Drop to Lowest in 3 Weeks on China Output, U.S.

August 11, 2010

Russian stocks slid to their lowest in three weeks as oil fell for a second day after China’s industrial output slowed and the Federal Reserve said U.S. economic expansion will be “more modest” than anticipated.

OAO Severstal, Russia’s largest steelmaker, lost 3.2 percent. Oil producers OAO Lukoil and OAO Rosneft both fell by more than 1 percent. The Micex Index (INDEXCF) of 30 companies dropped 1.5 percent to 1,376.88 at the 6:45 p.m. close of Moscow trading, its lowest since July 21.

Crude for September delivery fell as much as $1.78 cents, or 2.2 percent, to $78.47 a barrel in New York after the Fed said yesterday it needed to take steps to boost the economy. China’s industrial output grew the least in 11 months in July, a sign companies may be holding off on spending.

“Yesterday’s Fed policy announcement is an admission that the recovery is faltering and the central banks’ hands are tied by the rising food inflation risks,” Alexey Zabotkin, head of investment strategy at VTB Capital, wrote in an e-mailed report today.

Copper retreated 1 percent to $7,224 a metric ton on the London Metal Exchange. The other five main metals traded on the LME also declined. OAO GMKN Norilsk Nickel, Russia’s main miner, dropped 2 percent to 5,053.2 rubles.

OAO Silvinit climbed as much as 5.1 percent, the most since July 28, after OAO PhosAgro proposed a merger, raising speculation there may be a bidding war for Russia’s largest potash producer. The stock closed 0.8 percent higher at 18,835.79 rubles in Moscow.

Billionaire Suleiman Kerimov, who bought Russia’s second- largest potash producer, OAO Uralkali, in June, may purchase a 52.4 percent stake in Silvinit as early as this month, Vedomosti reported Aug. 2. By proposing a merger with Silvinit, PhosAgro is seeking to block a merger between the company and Uralkali, Luis Saenz, a London-based director of international sales at brokerage Otkritie Securities Ltd., wrote in an e-mailed comment. PhosAgro uses potash in its production of fertilizer component, he said.

To contact the reporter on this story: Jason Corcoran at Jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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