Bloomberg News

Futures Drop After Oil Falls to Five-Month Low: Russia Overnight

May 15, 2012

Russian stock futures declined and shares traded in the U.S. tumbled for a third day after oil sank to a five-month low.

OAO Mechel (MTL:US), Russia’s largest coking coal producer, dropped to the lowest level since May 2009 yesterday, leading a slump in the Bloomberg Russia-US Equity Index (RUS14BN) and widening a discount to the company’s Moscow-listed shares to 4.7 percent, the most since March. The gauge of the most-traded Russian companies in New York lost 0.8 percent to 89.35, the lowest since Dec. 19. Futures expiring in June on Russia’s RTS (RTSI$) Index retreated 1.3 percent in U.S. trading.

Oil, Russia’s major export earner, fell near a five-month low on the New York Mercantile Exchange yesterday while copper dropped to a four-month low on mounting concern about Greece exiting the euro. Greece will hold new elections after President Karolos Papoulias failed to broker a governing coalition following an inconclusive May 6 vote.

“The collapse of the Greek government worries investors when they look over the next six months,” Ian Hague, who manages Russian equities as a partner at Firebird Asset Management, which oversees $1.3 billion, said by phone yesterday from New York. “We have entered a risk-off trade period and generally negative oil and commodities prices have much of an impact on Russia.”

The Market Vectors Russia ETF (RSX:US), a U.S.-traded fund that holds Russian shares, retreated 0.9 percent to $25.71 yesterday, the lowest since Oct. 7. The RTS Volatility Index, which measures expected swings in the index futures, rose 0.5 percent to 37.40 points.

Oil Tumbles

Crude oil for June delivery decreased 0.8 percent to $93.98 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 19. Prices are down 4.9 percent this year. Russia got almost 50 percent of government revenue from oil and gas sales last year.

Brent oil for June settlement gained 0.6 percent to $112.24 a barrel on the London-based ICE Futures Europe exchange. The more-active July contract rose 0.4 percent, to $111.43.

Urals crude, Russia’s chief export blend, rose 0.5 percent to $110.09 a barrel, gaining for the first session in six.

OAO Gazprom (OGZPY:US), the world’s biggest producer of natural gas and Russia’s state-run natural gas monopoly, dropped 2.7 percent to $9.44 in New York yesterday, widening its discount to Moscow shares to 2.6 percent, the steepest since November 2008. The stock retreated 0.9 percent to 148.25 rubles, or $4.84, on the Micex yesterday. One Gazprom ADR is equal to two ordinary shares.

Mechel Slumps

Mechel (MTLR) declined 5.3 percent to $6.43 in New York. The stock lost 2.4 percent to 206.40 rubles, or $6.74, in Moscow.

The Standard & Poor’s GSCI Index of 24 commodities was little changed at 636,100 yesterday.

Copper futures for July delivery dropped 1 percent to settle at $3.5175 a pound on the Comex in New York yesterday. Prices earlier touched $3.5005, the lowest for a most-active contract since Jan. 11.

The ruble weakened for an eighth day yesterday, depreciating 0.6 percent to 30.60 per dollar by the close in Moscow, extending its longest stretch of declines since Dec. 14, 2011.

The 30-stock Micex Index (INDEXCF) added 0.5 percent to 1,344.75 in Moscow yesterday, after Russia’s Federal Statistics Service reported gross domestic product grew at the fastest pace in the first quarter since the three months ended September 2011. The dollar-denominated RTS index fell 0.1 percent to 1,400.77, the lowest since Jan. 2.

VimpelCom, MTS

VimpelCom Ltd. (VIP:US), the world’s sixth-largest wireless operator, fell 0.1 percent to $9.08 in New York yesterday. The company reported first-quarter adjusted net income of $354 million, beating the $345 million median estimate of four analysts surveyed by Bloomberg as sales in Russia climbed 11 percent.

OAO Mobile TeleSystems (MBT:US), Russia’s largest mobile operator also known as MTS, fell 2 percent to $16.42 in New York yesterday, the lowest since Jan. 24.

VimpelCom trades at 7.4 times estimated earnings, a 20 percent discount to the multiple of MTS, according to data compiled by Bloomberg.

“VimpelCom published very strong results confirming the turnaround in Russia,” Tibor Bokor, the London-based research director for telecommunication stocks in Europe, the Middle East and Africa at ING AG, said via e-mail. “On top of that VimpelCom stock underperformed MTS. The correction in VimpelCom has been overdone and needs adjustment.”

United Co. Rusal, the world’s largest aluminum producer, fell 2.3 percent to HK$4.78 in Hong Kong trading as of 11:54 a.m. local time. The MSCI Asia Pacific Index slid 2.3 percent.

To contact the reporters on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • MTL
    (Mechel)
    • $1.45 USD
    • -0.09
    • -6.21%
  • RSX
    (Market Vectors Russia ETF)
    • $23.55 USD
    • -0.12
    • -0.51%
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