Bloomberg News

Russian Stocks Drop Fourth Day After Moody’s Downgrades Italy

October 05, 2011

Oct. 5 (Bloomberg) -- Russian stocks erased earlier gains and fell for a fourth day after Moody’s Investors Service downgraded Italy, spurring concern Europe’s debt crisis may hurt demand for the nation’s exports.

The Micex Index of 30 shares lost 0.2 percent to 1,265.67 as of the 6:45 p.m. close in Moscow, after earlier advancing as much as 2.8 percent. The dollar-denominated RTS Index slid 0.6 percent to 1,217.21. VTB Group, the country’s largest lender, and OAO Rostelecom, Russia’s state-owned telecommunications holding company, led declines, sliding 1.6 percent to 6.009 kopeks and 2 percent to 134.14 rubles, respectively. OAO Gazprom, the nation’s gas export monopoly, fell 0.9 percent.

“Moody’s overnight downgrade of Italy’s debt is a reminder of looming risks,” Peter Szopo, head of research at Alfa Bank in Moscow, wrote in an e-mailed note.

Moody’s cut Italy’s rating three levels to A2, the fifth- lowest investment grade, citing concern the government will struggle to reduce the region’s second-largest debt.

Russian stocks are the cheapest in the BRIC group of countries, with Micex Index members trading at 4.5 times analysts’ estimated earnings as of yesterday’s close, compared with 8.7 for Brazil’s Bovespa, 10.9 for the Shanghai Composite Index and 13.4 for the BSE India Sensitive Index.

“Calling a bottom to the market remains the constant preoccupation, although it’s really a hopeless exercise because no one knows exactly how bad it must become for European Union policymakers to do rather than say something drastic,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, wrote in e-mailed comments today.

Hedge Fund Cuts

Hedge funds cut their bullish bets, or long positions, on oil by the most in almost two months in the week ended Sept. 27, according to the Commodity Futures Trading Commission. Concern that economic growth will falter sent crude to the biggest quarterly drop since 2008 in the three months ended Sept. 30.

Urals crude, Russia’s main export, traded little changed at $100.36 a barrel, while crude futures in New York climbed 2.2 percent to $77.38 a barrel.

OAO Lukoil gained 0.4 percent to 1,548.9 rubles after deputy chief Leonid Fedun was cited by the RIA Novosti news service as saying that the company has $7 billion of cash available to pay back debt early.

Copper for delivery in three months slipped 0.6 percent, to $6,760 a metric ton on the London Metal Exchange. Most metals listed on the LME slumped. OAO GMK Norilsk Nickel, the world’s biggest producer of the metal, dropped 1.1 percent to 6,136 rubles.

AFK Sistema rebounded after RIA Novosti reported Chief Executive Officer Mikhail Shamolin said billionaire Vladimir Yevtushenkov’s holding company may expand its buyback program, rising 0.5 percent to 20.408 rubles.

--With reporting by Leon Lazaroff in New York. Editors: Linda Shen, Ana Monteiro

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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