Bloomberg News

Russian Stocks Retreat From One-Week High on U.S. Economy Data

March 27, 2012

Russian stocks retreated from a one-week high as oil, the country’s main export revenue earner, fell after confidence among U.S. consumers dropped and shares of energy companies retreated.

The 30-stock Micex (MICEX) index slid 0.7 percent to 1,554.28 at the close in Moscow, erasing an earlier gain of as much as 0.6 percent. OAO Rosneft, the country’s biggest oil producer, lost 0.9 percent, while OAO Severstal, the Russian steelmaker, retreated 1.8 percent.

The Conference Board’s consumer confidence index in the U.S. dropped to 70.2 in March from a revised 71.6 reading in February that was higher than initially reported. The median forecast of economists surveyed by Bloomberg News called for a decrease to 70. Urals crude, Russia’s main export earner, snapped two days of gains, sliding 0.2 percent to $122.10 a barrel.

“Investors appear to be trying to push the market higher toward the end of the quarter on any more-or-less positive news,” Slava Smolyaninov and Leonid Slipchenko, analysts at UralSib Financial Corp. in Moscow, wrote in an e-mailed note.

Russian stocks rose the most in two weeks yesterday after Deutsche Bank AG said former Yukos Oil Co. billionaire Mikhail Khodorkovsky has a “50-50” chance of winning an early release and Federal Reserve Chairman Ben S. Bernanke said continued monetary stimulus will be needed to bolster employment in the world’s largest economy.

Driving Market Up

The RTS Index fell 0.8 percent to 1,699.68 today. The dollar-denominated gauge will reach 1,900 by the end of June, according to Alfa Bank. Brent crude, the oil type that underpins prices for Urals, will rise as much as 1.8 percent to $127.50 in the second quarter of 2012, according to Paris-based Societe Generale SA.

“We still expect oil to have an upside at this point, and that could really keep driving the Russian market up,” said Rebecca Cheong, a New-York-based equity-derivatives strategist at Societe Generale. “In the short term, oil will have more to do with keeping the market up than Putin’s reforms. Iranian production and exports are expected to fall on European and U.S. sanctions that should go into effect by July 1.”

Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries, pumped 3.45 million barrels a day last month, the lowest level since September 2002, according to data compiled by Bloomberg. U.S. and European sanctions aimed at forcing Iran to halt its nuclear program have spurred threats from the Persian Gulf nation to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil.

Third Term

Rusal, the world’s biggest aluminum maker, lost 0.3 percent to 216.88 rubles. OAO Sberbank (SBER), Russia’s largest lender, fell 2.2 percent to 97.84 rubles.

Putin will start his third term as president on May 7 following a campaign in which he pledged to boost pensions and support for small business as well as reverse “repressive” state policies. The former KGB officer also said he would continue with plans to reduce government stakes in state-run companies and tackle corruption.

“In the second quarter we’re going to get a lot more of the very positive domestic momentum, new agenda, new promises, some delivery of political reforms, measures against corruption, these are all taken positively by investors,” Chris Weafer, chief strategist at Troika Dialog, the investment banking unit of state-run lender OAO Sberbank, said in an interview at Bloomberg’s New York headquarters yesterday.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, fell 1.3 percent to $31.68. The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, dropped 3.1 percent to 30.87.

The Micex is the cheapest of the benchmark indexes for BRIC countries, trading at about 6.1 times earnings estimated by analysts. That compares with about 9.8 for the Shanghai Composite Index and 15.3 for the BSE India Sensitive Index.

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

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


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