Bloomberg News

Russian Stocks Retreat First Day in Three Before Europe Summit

October 25, 2011

Oct. 25 (Bloomberg) -- Russian stocks fell from a month- high before talks in Europe aimed at containing the region’s debt crisis and after Goldman Sachs Group Inc. cut its recommendation for two of the country’s biggest metals companies.

The 30-stock Micex Index dropped 1.4 percent to 1,462.17 at the 6:45 p.m. close in Moscow, paring yesterday’s 2.5 percent gain. OAO GMK Norilsk Nickel, Russia’s largest miner, slipped 5 percent after Goldman downgraded the stock to “sell” from “neutral.” United Co. Rusal, the world’s biggest aluminum producer, dropped 0.7 percent after it was reduced to “neutral” from “buy.”

Russian stocks have risen 15 percent from this year’s low on Oct. 5 and reached a one-month high yesterday amid hopes that European Union policy makers will reach a deal to stop the banking crisis from spreading. Officials are seeking to bolster the region’s rescue fund, recapitalize banks and provide debt relief to Greece to avoid contagion spreading to Italy and Spain. Emerging-market stocks climbed for a third day.

“People are rebalancing their portfolios after yesterday’s rally and ahead of tomorrow’s EU summit,” Yuri Volov, an analyst at Nomos Bank in Moscow, said by e-mail. “It’s hard to predict. The markets recently turned from being too skeptical towards being too positive about the summit.”

European Stocks extended losses after the U.K. government said a meeting of EU finance ministers scheduled for tomorrow to decide on bank recapitalization was canceled. They pared some of their decline as it was confirmed that summits of the 27 EU leaders and 17 euro-area heads of government will take place in Brussels as planned.

Slowdown

A downturn in Europe and slower growth in the U.S. may lead to less demand growth for commodities, Goldman said in the note e-mailed today. Norilsk fell to 6,307 rubles, its biggest daily drop since Oct. 4, while Rusal’s Russian depositary receipts declined to 270.04 rubles.

The dollar-measured RTS Index fell 0.6 percent to 1,500.05. OAO Sberbank, Russia’s biggest lender, slid 2.5 percent on the Micex.

The Micex has lost 13 percent in 2011 and trades at 5.2 times analysts’ earnings estimates for member companies. That compares with an 18 percent slide for Brazil’s Bovespa index, which trades at 10 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 11 times estimated earnings, and the BSE India Sensitive Index has a ratio of 14.7.

--Editors: Alex Nicholson, Linda Shen

To contact the reporters on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net; Jack Jordan in Moscow at jjordan22@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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