Bloomberg News

RTS Futures Fall as Europe Concerns Hit Mechel: Russia Overnight

September 12, 2011

Sept. 12 (Bloomberg) -- Russian RTS futures fell, signaling the measure may extend the first weekly decline in three, as concern Europe’s economy is slowing cut metals prices and sent mining company OAO Mechel to a two-year low in New York.

Futures on the dollar-denominated index due in September declined 1.6 percent to 157,615 on Sept. 9. The RTS Volatility Index, which measures expected swings in the index futures, jumped the most in a week, rising 4.9 percent to 44.26 points. The RTS fell 1.9 percent last week after two weeks of gains. United Co. Rusal, the largest aluminum producer, slumped 5.7 percent in Hong Kong as of 11:51 a.m. local time. The 30-stock Micex Index may slide 2 percent at the start of trading today, according to Alfa Bank. Asian stocks fell.

Greek Finance Minister Evangelos Venizelos dismissed “rumors” of a default on Sept. 9, the day after European Central Bank President Jean-Claude Trichet said the euro region economy faces “downside risks.” Oil, Russia’s biggest export earner, as well as copper, nickel and iron ore dropped, as the debt problems spurred concern demand for natural resources will wane. American depositary receipts of Mechel, which got 19 percent of 2010 sales from Europe, lost 9 percent last week to $15.63 in New York, the lowest level since September 2009.

“Europe is the key driver here, and with commodities selling off, it’s certainly going to hit Russia,” Tom Furda, director of Russian equity sales at Auerbach Grayson & Co.’s Moscow-based brokerage partner UralSib Financial Corp., said in a phone interview. Investors are “choosing to get in and out of Russia very quickly,” he said.

Micex Drops

RTS futures retreated after the index in Moscow fell 3 percent to 1,625.29 on Sept. 9. The Micex Index lost 2.5 percent, the most in three weeks, to 1,518.22, paring its advance for the week to 0.2 percent.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, retreated 4.3 percent on Sept. 9 to $31.07 while the Bank of New York Mellon Russia ADR Index dropped 4 percent.

The Standard & Poor’s GSCI Index of raw materials retreated as much as 1.3 percent today. Crude for October delivery on the New York Mercantile Exchange sank 1.2 percent to $86.21 a barrel in after-hours trading, following a 2 percent drop on Sept. 9. Urals crude, Russia’s chief export oil blend, slipped 0.8 percent to $114.18 on Sept. 9, paring its weekly advance to 0.5 percent.

Mechel Slides

OAO Gazprom, the world’s biggest natural gas exporter, slumped 4.6 percent in U.S. trading, its biggest decline in three weeks, to $11.07. The stock slipped 3.4 percent to 168.86 rubles, or the equivalent of $5.62, on the Micex, according to data compiled by Bloomberg. OAO Lukoil, Russia’s largest non- state oil producer, declined 3.5 percent, its biggest drop in four weeks, to $56.95 in New York. It closed at 1,725 rubles, or the equivalent of $57.42, in Moscow.

ADRs of Mechel, Russia’s largest producer of coal for steelmakers, fell after the company slid 2.3 percent to 491.60 rubles, or the equivalent of $16.38, on Moscow’s Micex index on Sept. 9.

U.S.-traded shares of OAO GMK Norilsk Nickel, the world’s largest producer of the metal, fell 3.8 percent on Sept. 9 to $24.20, after dropping 1.6 percent to 7,386 rubles, or the equivalent of $251.39 in Moscow. European sales accounted for more than half of Moscow-based Norilsk’s revenue last year.

Nickel fell 0.5 percent to $21,049 a ton on the London Metals Exchange today, following a 4.2 percent slump on Sept. 9. Copper prices in New York declined 1 percent to $3.9625 a pound after sliding 3.4 percent on Sept. 9.

Lower Valuations

The euro weakened to $1.3555, the lowest level against the dollar since Feb. 22, before trading at $1.3596 from $1.3656 last week. Russia’s ruble tumbled 1.4 percent to close at 29.9325 per dollar in Moscow, the weakest level since January.

The Micex has lost 10 percent in 2011 and trades at 5.7 times analysts’ earnings estimates, down from as high as 8.9 in March, this year’s high. That compares with a 20 percent slide for Brazil’s Bovespa Index, which trades at 9.5 times estimated earnings, according to data compiled by Bloomberg.

“Things are probably going to get worse before they get better,” Erwin Sanft, deputy head of Asian equities research at BNP Paribas, said in a Bloomberg Television interview from Hong Kong. “Much larger economies are being drawn into this crisis.”

--Editor: Emma O’Brien, Laura Zelenko.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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