Volatility at Five-Week High as Mechel Slumps
OAO Mechel (MTL) led New York-traded Russian stocks lower and RTS futures’ volatility jumped as policy makers in Europe, the nation’s biggest export destination, failed to meet expectations for more stimulus measures.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in New York fell to the lowest level in a week as Mechel (MTLR), the nation’s biggest producer of cocking coal, traded at the biggest discount to the Moscow shares in six weeks. The RTS Volatility Index, which measures expected swings in the index futures, rose to the highest level since June 28. Futures expiring in September on the dollar-denominated RTS index dropped 0.8 percent to 133,885.
Oil, Russia’s biggest export earner, tumbled to the lowest level in three weeks and commodities retreated after ECB President Mario Draghi signaled the bank will join with governments to buy sovereign bonds, without listing definitive measures to bolster growth. Last week, Draghi had pledged to do “whatever it takes” to preserve the euro. Russia, the world’s largest producer of nickel and palladium, received about half of its 2011 budget revenue from sales of oil and natural gas.
“Investors are disappointed with the ECB decision,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow, said by phone yesterday. “They are adjusting their positions. It has a very negative effect on Russian assets and volatility of the market. There is no reason to expect any appetite for risk any time soon.”
The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, retreated 1.5 percent to $26.08. The RTS Volatility Index advanced 3.2 percent to 37.17 yesterday.
‘Action and Clarity’
“Investors want to see action and clarity,” Sergey Dergachev, who helps manage $8.5 billion of emerging-market assets at Union Investment Privatfonds in Frankfurt, said by e- mail yesterday. “This uncertain environment is relatively bad scene for Russian assets. The ECB signals were indeed a little bit disappointing. Markets became nervous.”
ECB officials are working on the plan and details will be fleshed out in coming weeks, Draghi told reporters in Frankfurt yesterday. The central bank earlier kept the benchmark interest rate on hold at 0.75 percent.
Investors will watch U.S. nonfarm payroll figures from the Labor Department today as an “important” indicator for market direction, Dergachev said.
A Labor Department report today may show that the pace of hiring in July probably failed to reduce the U.S. jobless rate, according to economists polled by Bloomberg. Unemployment is projected to hold at 8.2 percent.
The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials fell 1.6 percent 294.50, the lowest since July 13, while the Standard & Poor’s GSCI Spot Index dropped 1.1 percent to 630.33.
Russia is home to some of the world’s biggest metals producers, including United Co. Rusal (486), the largest aluminum producer, and OAO GMK Norilsk Nickel (NILSY), the largest producer of nickel and palladium.
Mechel’s American depositary receipts slumped 6.2 percent to $6.20 yesterday, settling at a 3.8 percent discount to the company’s Moscow-listed shares, the biggest gap since June 21. The company’s Moscow stock rose 0.1 percent to 210 rubles, or $6.44.
American depositary receipts of Norilsk Nickel fell 0.8 percent to $15.33 in New York, the lowest since July 25. The stock slid 0.3 percent to 5,031 rubles, or $154.3, in Moscow. Ten ADRs equal one common share.
Oil for September delivery sank 2 percent to $87.13 a barrel on the New York Mercantile Exchange, the lowest level since July 13. Prices have declined 12 percent this year.
Brent crude for September settlement increased 0.1 percent to $105.90 a barrel on the London-based ICE Futures Europe exchange. Urals crude added 0.8 percent to $106.57 yesterday.
OAO RusHydro (RSHYY), Russia’s largest hydropower company, advanced 3.7 percent to $2.53 in New York yesterday. The stock rose 2.7 percent to 84.40 kopeks in Moscow, or 2.6 U.S. cents. Each ADR represents 100 ordinary shares.
The company said yesterday that first-quarter revenue fell to 85.2 billion rubles ($2.61 billion), beating the 78.6 billion estimated by Alfa Bank.
To contact the reporter on this story: Halia Pavliva in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Tal Barak Harif at email@example.com