Futures Climb as Mechel Advances on China Factory Boost: Russia Overnight

RTS stock futures rose and OAO Mechel (MTL) led U.S.-traded Russian equities higher as growth in U.S. and Chinese manufacturing bolstered commodities.

Futures expiring in March on Moscow’s dollar-denominated RTS index (RTSI$) advanced 0.3 percent to 160,715 in the U.S. yesterday as the Bloomberg Russia-US 14 Index of Russian companies traded in New York added 2.2 percent to 105.79, a three-month high. OAO Lukoil (LUKOY), Russia’s largest non-state oil producer, gained to create a 45-cent premium to its Moscow shares. OAO Gazprom (OGZPY) rose to a one-week high after Renaissance Capital said the world’s biggest natural gas exporter vowed to cut investment spending.

U.S. manufacturing in January grew at the fastest pace in seven months, adding to signs of a global recovery. Output in Germany, Europe’s largest economy, grew for the first time since September. Russia’s economy expanded faster than forecast last year as falling unemployment and record-low inflation helped bolster consumer demand in the fourth quarter.

“We’re seeing a very decent rally in Russian equities because the oil price is high, the Russian economy is growing and global growth is improving.” Roland Nash, chief investment strategist at Moscow-based hedge fund Verno Capital, which manages more than $150 million in Russia, said in a phone interview. “At some point this year, maybe now, the gap between Russian equities and the oil price will close.”

Brent oil, the European benchmark, has gained 4.3 percent since Dec. 12 while Russia’s Micex (INDEXCF) Index has surged 14 percent. During the first 11 months of 2011, Brent gained 16 percent while the Micex lost 11 percent.

Oil Prices

“There’s been a disconnect between them for too long,” Nash added.

Brent for March settlement climbed 0.5 percent to $111.56 a barrel on the London-based ICE Futures Europe exchange while Urals crude, Russia’s chief export blend, gained 0.6 percent to $111.41, a one-month high. Crude for March delivery fell 0.9 percent to settle at $97.61 a barrel on the New York Mercantile Exchange after an Energy Department report showed that U.S. inventories climbed more than expected.

United Co. Rusal, the world’s largest aluminum producer, rose 0.9 percent to HK$5.93 in Hong Kong trading as of 11:18 a.m. local time. The MSCI Asia Pacific Index gained 1.1 percent today as confidence in the global economy grew.

OAO Mechel (MTLR), Russia’s largest coal producer for steelmakers, gained 2.7 percent to $11.39 in New York trading, advancing for the third time in four sessions as a report that manufacturing gained in China pushed up prices for copper and nickel. China is the world’s top copper buyer. In Moscow, shares of Mechel rose 1.2 percent to 340.40 rubles, or the equivalent of $11.30. One ADR represents one ordinary share.

Metals Prices

The S&P GSCI Industrial Metals Select Total Return Index rose 1.2 percent, its first advance in four days, to 242.3944. Zinc, lead and aluminum also gained.

In the U.S., the Institute for Supply Management’s index of U.S. manufacturing climbed to 54.1, from 53.1 in December, indicating economic expansion while lifting the Standard & Poor’s 500 Index 0.9 percent to 1,324.08, its first advance in five sessions.

In China, the official purchasing managers’ index increased to 50.5, from 50.3 in December. In Germany, Europe’s largest economy, output grew for the first time since September, and in the U.K., manufacturing returned to growth in January after shrinking in the previous three months.

“The PMI figures out today weren’t outstanding but considering where managers’ expectations were just one or two months ago, it’s certainly a welcome improvement,” Vladimir Pantyushin, a Moscow-based economist at Barclays Capital, said in a phone interview. “It’s very important for Russia and the rest of the global economy that the businesses in these major economies show a positive outlook.”

Lukoil, Gazprom

Lukoil’s American depositary receipts gained 2.2 percent to $59.60 after shares in Moscow rose 0.6 percent to 1,783 rubles, or $59.18. One ADR represents one ordinary share.

Gazprom added 1.9 percent in New York to $12.28 after Renaissance Capital said the company vowed to cut investment spending by 35 percent during a conference call with investors yesterday, Ilya Balabanovsky, an analyst at the investment bank said in a phone interview. Gazprom has been bolstered by colder- than-normal weather across Europe, where it supplies about 25 percent of the gas market.

The company’s shares in Moscow rose 0.9 percent to 185.70 rubles, or the equivalent of $6.16. One ADR represents two ordinary shares.

Investment Plan

CTC Media Inc. (CTCM) rose 6.7 percent to $10.69, the most since Oct. 10, as the U.S.-listed Russian television network began broadcasting programming CTC-International, an international version of the company’s main television channel CTC, via cable and satellite in Kazakhstan, the third-largest of the former Soviet republics.

OAO RusHydro (RSHYY), Russia’s largest hydro-power producer, rose 3.9 percent to $3.97 in New York. Russian authorities are expected to cut Rushydro’s investment program for 2012, “which would be positive,” as the government limits increases in electricity prices, Finam brokerage Moscow-based analysts, led by Vladimir Sergievskiy, said in a report dated yesterday.

The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, advanced 3 percent to $31.16, a two-month high. The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, dropped for the third day in four, falling 1.3 percent to 30.75 points, a six-month low.

The RTS Index (RTSI$) gained for a second day, adding 1.4 percent to 1,599.56, while the 30-stock Micex advanced 1.7 percent to 1,539.36, its highest level since Sept. 8.

Sberbank, Gazprom Neft

The Micex has gained 9.8 percent this year and trades at 5.9 times analysts’ earnings estimates for member companies. That compares with a 14 percent gain in 2012 for Brazil’s Bovespa (IBOV) index, which trades at 10.3 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index (SHCOMP) trades at 9.3 times estimated earnings, and the BSE India Sensitive Index (SENSEX) has a ratio of 15.2.

OAO Sberbank (SBRCY) Chief Executive Officer German Gref, OAO Gazprom Neft (GZPFY) CEO Alexander Dyukov and OAO Rosneft (ROSN) President Eduard Khudainatov are scheduled to speak at an economic conference in Moscow today.

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