Russia Stocks Drop as Economic Woes Drive Oil Below $100

Russian stocks sank for a second week, erasing the benchmark index’s gain this year, as concern the global economic recovery is faltering pushed crude below $100 for the first time since February.

The 30-stock Micex Index (INDEXCF) retreated 0.3 percent to 1,386.41 by the 6:45 p.m. close in Moscow. The benchmark lost 5.9 percent this week, the biggest weekly drop since December. OAO Novolipetsk Steel, billionaire Vladimir Lisin’s steelmaker, fell to an almost three-year low on concern the European economic slowdown may curb demand for the metal. Oil producers OAO Surgutneftegas and OAO Gazprom Neft dropped at least 0.8 percent. OAO Raspadskaya, a Russian coal producer, added 1.4 percent.

Oil, Russia’s main export earner, dropped the most since December yesterday as a U.S. government report showed payrolls had their smallest gain in six months. France and Greece hold elections this weekend, stoking concern leadership changes will hamper efforts to resolve Europe’s debt crisis.

“The Russian market is like a monkey that’s watching the Western economic indicators,” Alexander Ivanischev, equities analyst at Infina Investment Co. in Moscow, said by phone. “External risks from the European power change and the mixed U.S. data are pressuring the Micex.”

Russia, the world’s biggest energy exporter and the largest producer of nickel and palladium, got almost 50 percent of budget revenue from oil and gas sales last year, according to government estimates.

‘Free Fall’

Russia-focused equity funds recorded back-to-back outflows in the week ended May 2 for the first time since December, posting net outflow of $18 million, according to EPFR Global data.

The dollar-denominated RTS Index fell 0.6 percent to 1,489.55, the lowest level since Jan. 18. The index lost 6.6 percent this week. Markets are open today before the May 7 to May 9 holidays.

Crude oil for June delivery tumbled $4.05 to $98.49 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement since Feb. 7. It was the biggest one-day drop since Dec. 14 and capped a 6.1 percent decline for the week, the most since September.

Urals crude, the country’s main export blend, fell 2.7 percent to $110.99 yesterday, the lowest level since Jan. 31.

“When the market loses the support of high oil prices and positive economic data, it finds itself in free fall,” Ivanischev said. The Micex may extend declines, retreating a further 3.8 percent to 1,330 in the next “few days,” Ivanischev said.

Global Markets Slump

The MSCI Emerging Markets Index dropped 0.6 percent this week to 1,012.96, its seventh straight weekly retreat and the longest string of weekly declines since 2008.

“The Russian market is expecting a further slump in the global markets and oil prices,” Alexei Kozlov, an equities trader at Ufs-Finance Investment Co. in Moscow, said by phone.

The S&P 500 fell 2.4 percent to 1,369.10 this week, trimming its gain for the year to 8.9 percent after the biggest weekly retreat in 2012.

Five polls showed socialist candidate Francois Hollande maintaining a lead over Nicolas Sarkozy before the May 6 vote in France. U.S. payrolls climbed 115,000 in April, Labor Department figures showed yesterday in Washington, while the median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance. Euro-region services and manufacturing output contracted more than initially estimated in April, a report showed yesterday.

First 100 Days

The Micex has returned 5.7 percent to investors in the first four months of the year, less than half the earnings for the MSCI Emerging Markets index (MXEF), according to data compiled by Bloomberg.

Russia’s benchmark measure has lost 14 percent since Vladimir Putin won the March 4 presidential election, returning the former KGB officer to the Kremlin.

“The first 100 days of Putin’s presidency will be indicative of his economic policy for the next six years,” Ivanischev said.

Analysts are concerned Putin may prevent government asset sales set out by President Dmitry Medvedev, who will replace him as premier. Medvedev has ordered the government to cut its stakes in lenders to less than 50 percent as part of a pledge to relinquish government control over companies.

While backing sales to boost competition, Putin said in a Jan. 30 Vedomosti article it would be “stupid to sell assets on the cheap, ignoring the situation on markets.” Putin will be inaugurated on May 7 after four years as Russia’s prime minister.

Raspadskaya, Rusal

The Micex will be open for trading during public holidays on May 7 and 8 and closed on May 9.

Novolipetsk Steel, or NLMK, as the steel producer is known, declined 2 percent to 55.79 rubles, the lowest price since June 2009. NLMK got 24 percent of its revenue from European sales in 2011, up from 22 percent in 2010, data compiled by Bloomberg show.

OAO Magnit, Russia’s biggest retailer by market value, declined 1.4 percent to 3,445.10 rubles, the lowest level since March 6. The shares fell 6.9 percent this week, the biggest weekly decline since the week ended Sept. 25.

Surgutneftegas lost 1.3 percent to 26.631, the lowest price since Jan. 17. Raspadskaya, a Russian coal producer, advanced 1.4 percent to 88.19 rubles, the most since April 28. The stock lost 9.6 percent this week, the biggest weekly drop since the week ended Oct. 9.

Russian stocks trade at 4.9 times estimated earnings, having lost 1.1 percent this year. That compares with a 10 percent gain for the MSCI Emerging-Market Index which trades at 10 times projected earnings.

Trading volumes on the Micex slumped 30 percent in April from the month before compared with a 22 percent drop in the same period a year earlier.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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