Bloomberg News

Brent Above $100 Spurs Jump to Seven-Week High: Russia Overnight

July 04, 2012

Russian stocks traded in New York rose to the highest level in seven weeks as OAO Sberbank (SBRCY:US) rallied after Brent crude climbed above $100 on prospects central banks in Europe will ease monetary policy.

The Bloomberg Russia-US 14 Index (RUS14BN) of Russian companies traded in New York advanced 2.3 percent to 91.40 yesterday. Futures expiring in September on the dollar-denominated RTS index lost 0.3 percent to 139,900. Sberbank, the biggest lender in eastern Europe, increased to the highest level since May 15 while OAO Gazprom, Russia’s natural gas export monopoly, climbed for a third day. CTC Media Inc. (CTCM:US) tumbled to a three-year low as UBS AG cut its recommendation on the shares.

Brent for August settlement traded above $100 a barrel for the first time since June 11 on speculation the European Central Bank and the Bank of England will announce steps tomorrow that will ease monetary policy and spur growth in the countries that are the biggest buyers of Russia’s natural resources. The world’s largest energy exporter got almost 50 percent of budget revenue from oil and gas sales last year.

“The move for Brent does make the picture look better,” Mattias Westman, managing director of Prosperity Capital Management, the largest Russia-focused equity investor with about $4 billion under management, said in a phone interview from London yesterday. “The risk of a terrible scenario in Europe seems to be receding, and the ECB seems ready to do something that could embolden markets.”

The Market Vectors Russia ETF (RSX:US), the biggest U.S. exchange- traded fund that holds Russian shares, surged to the highest level in two months, adding 3.3 percent to $27.34. The RTS Volatility Index, which measures expected swings in the index futures, rose for a second day, increasing 2.4 percent to 33.70.

‘A Relief’

Sberbank rose 4.4 percent to $11.40, extending its gain to 13 percent since European leaders agreed on June 29 to ease repayment rules for troubled euro zone banks. Euro-area policy eased repayment rules for emergency loans to Spanish banks last week and relaxed conditions on potential help for Italy.

Sberbank gained 3.7 percent on the Micex (INDEXCF) to 90.93 rubles, or the equivalent of $2.83. One American depositary receipt represents four ordinary shares.

Gazprom climbed 3.8 percent to $9.88 as the company agreed to a price deal with EON, its largest European Union customer. Gazprom is seeking to keep more than 25 percent of the region’s gas market. Shares in Moscow rose 2.4 percent to 159 rubles, or the equivalent of $4.95. One ADR represents two ordinary shares.

“The agreement does not appear to be very different from what was expected, but for some it was a relief just to know what it would be,” Westman said.

‘Weaker-Than-Expected’

CTC Media tumbled 7 percent to $7.42, the lowest since April 2009. UBS cut its recommendation on the shares to neutral from buy and reduced its price estimate, citing decreased audience share combined with “weaker-than-expected” television advertising growth.

Russian equities may get a boost as shareholders reinvest a portion of the approximately $8.4 billion in dividend payouts they are scheduled to receive by the end of August, Renaissance Capital said in a July 3 report. An additional $5 billion to $6 billion in stock buybacks by Russian companies may also send stocks higher, Milena Ivanova-Venturini, an analyst at Renaissance, wrote in the note.

The 30-stock Micex Index gained 2.5 percent to 1,437.44 yesterday, a two-month high.

Oil Surges

Commodities rose to a five-week high, led by energy, as crude for August delivery surged 4.7 percent to settle at $87.66 a barrel on the New York Mercantile Exchange. Brent crude for August settlement increased 3.4 percent to $100.68 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, gained 4.3 percent to $99.98.

The Standard & Poor’s GSCI Spot index of 24 raw materials rose 3.4 percent to 618.

The S&P 500 (SPX) Index advanced 0.6 percent to 1,374.02 as orders placed with U.S. factories rose in May for the first time in three months. The 0.7 percent increase in bookings followed a revised 0.7 percent drop in the prior month, the Commerce Department said yesterday in Washington.

United Co. Rusal, the world’s largest aluminum producer, was unchanged at HK$4.50 in Hong Kong as of the city’s noon trading break. The MSCI Asia Pacific Index gained 0.4 percent today amid speculation Chinese and European central bankers will ease monetary policy.

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

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


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Companies Mentioned

  • SBRCY
    (Sberbank of Russia)
    • $8.44 USD
    • -0.01
    • -0.12%
  • CTCM
    (CTC Media Inc)
    • $9.77 USD
    • 0.14
    • 1.43%
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