Bloomberg News

Mechel Drives Gains as Stocks Rediscover Crude

January 03, 2013

Russian stocks (RUS14BN:US) traded in New York soared to the highest level since September and are regaining their correlation with oil after the U.S. budget deal repaired the outlook for the world’s biggest consumer of crude.

The Bloomberg Russia-US Equity Index of the most-traded Russian equities in the U.S. rallied 2 percent to 101.25 yesterday, lifting its 65-day correlation coefficient with New York crude to 0.44, data compiled by Bloomberg show. The reading fell to 0.42 on Dec. 31, the lowest level since March 5. OAO Mechel (MTL:US), Russia’s biggest producer of coal for steelmakers, jumped to a three-month high, and Yandex NV gained the most since March. The Moscow Exchange is closed until Jan. 8.

Oil, which together with natural gas contributes about 50 percent of Russian budget revenue, surged to a three-month high yesterday, as U.S. lawmakers agreed on a deal to reverse tax increases that came into force Jan. 1 and avert cuts to spending. Russia’s crude oil and condensate output climbed 1.1 percent in 2012 from a year ago to a post-Soviet record, data from the Energy Ministry in Moscow issued yesterday showed.

“Oil helps and markets are risk on,” Julian Rimmer, a trader at CF Global in London who focuses on Russian and Turkish stocks, said by phone yesterday. “The spike in Russian equities has been amplified by low liquidity in the absence of a local market. This move is attributable to a perceived resolution to the U.S. fiscal impasse.”

Oil Rebounds

The 100-day correlation coefficient of oil and the Micex Index was at 0.26 on the last day of 2012, the lowest since May 20, 2011. A reading of 1 implies two securities are trading in lockstep. The Micex gauge added 5.4 percent last year, while the Russia-US index increased 9.7 percent.

The Market Vectors Russia ETF (RSX:US), the largest dedicated Russian exchange-traded fund, gained 2.6 percent to $30.68, the highest level since Sept. 14. The RTS Volatility Index, which measures expected swings in the stock futures, declined 2.7 percent to 23.56 points.

Crude oil for February delivery climbed 1.4 percent to $93.12 on the New York Mercantile Exchange, the highest level since Sept. 18. The futures dropped 7.1 percent last year, the first decline since 2008. Brent oil for February settlement climbed 1.2 percent to $112.47 a barrel on the London-based ICE Futures Europe. Urals crude, Russia’s chief export oil blend, gained 1.1 percent to $110.98 yesterday.

Mechel’s Premium

The Standard & Poor’s GSCI gauge of 24 commodities rallied 0.9 percent to 652,560, the highest level since Oct. 19.

American depositary receipts of Mechel (MTLR) gained 5.8 percent to $7.33 in New York yesterday. The ADRs settled at a 8.3 percent premium to the company’s Moscow-listed shares, the widest gap since Feb. 3, 2012. Shares last traded in Moscow at 204.4 rubles, or $6.77.

Yandex NV (YNDX:US), owner of Russia’s most-used search engine, rose 6.8 percent to $22.995 in New York, gaining the most since March 2. The company’s share of Russian Internet searches rose to 60.5 percent last month, from 60.2 percent in November, according to data on LiveInternet researcher’s website. Google Inc. (GOOG:US) saw its share of Russian searches decrease to 26.4 percent in December from 26.5 percent in November.

OAO RusHydro (RSHYY:US) rallied 5.9 percent to $2.49 in New York, settling at a 2.5 percent premium to the company’s Moscow stock. That was the biggest gap since March 1. RusHydro settled at 73.4 kopecks, or 2.4 U.S. cents on its last trading day.

OAO Lukoil (LUKOY:US), Russia’s second-biggest oil producer, fell 0.7 percent to $67 as trading volume jumped to 2.5 times the daily average for the past three months, data compiled by Bloomberg show. The stock was the biggest decliner on the Bloomberg Russia-US Equity Index (RUS14BN) yesterday.

Oil Output

Moscow-based Lukoil, which trails state-backed OAO Rosneft (ROSN) by output, and OAO Slavneft were the only two oil producers in the country that saw a decline in their crude output in 2012, data from the Energy Ministry’s CTEK unit showed yesterday. Russia’s crude oil and condensate production climbed 1.1 percent in 2012 from a year ago to a post-Soviet record, the data show. Lukoil saw its oil output slip 0.8 percent in 2012 from 2011, the data show.

United Co. Rusal (486), the world’s largest aluminum producer, rose 0.2 percent to HK$4.99 in Hong Kong trading as of 2:36 p.m. local time. The MSCI Asia Pacific Index gained 0.1 percent.

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

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • RUS14BN
    (Bloomberg Russia-US Equity Index)
    • $77.74 USD
    • -1.14
    • -1.47%
  • MTL
    (Mechel)
    • $1.19 USD
    • 0.06
    • 5.04%
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