Russian shares rose for the first time in three days as OAO Mechel (MTLR) rebounded from a four-year low and oil increased before U.S. data forecast to show more jobs were added in the biggest crude consumer.
The ruble-based Micex Index (INDEXCF) added 0.6 percent, the most on a closing basis since May 28, to 1,325.25 at 11:40 a.m. in Moscow, trimming a decline this week to 1.8 percent. Crude, which together with natural gas contributes 50 percent of Russia’s budget revenue, traded near the highest price in seven days. Mechel, the nation’s biggest coking coal producer, snapped a seven-day drop of 26 percent.
“Oil is trading at high levels; if it continues to rise, Russian stocks will recover,” Vitaly Kupeev, an analyst at Allianz Investments in Moscow, said by phone. “Mechel was completely sold off; now investors are buying the stock. The Russian market was oversold on fears the global stimulus program will be curbed.”
European Central Bank President Mario Draghi yesterday said the region’s economy should stabilize and recover at a subdued pace and that more stimulus measures were being left “on the shelf.” Europe is Russia’s biggest trade partner. Employers in the U.S. probably created as many jobs in May as in the month before, according to a Bloomberg survey before data due at 8:30 a.m. in Washington.
The RTS Index (RTSI$), which this week entered a bear market, rose 0.4 percent to 1,292.51. On the benchmark Micex, 44 stocks increased while six dropped. The measure’s 14-day relative strength index climbed to 37 today, seven points above the level which indicates to some analysts that an index is poised to advance. The RTS’s RSI traded within two points of the oversold level.
Russia-dedicated funds posted $117 million in outflows in the week ended June 5, according to an e-mailed note from UralSib Capital, which cited EPFR Global data. This is the second consecutive week of outflows, after Russia-dedicated funds lost $78 million the week earlier.
The volume of shares traded on the Micex was 45 percent below the 30-day average. Mechel increased 3.3 percent to 88.90 rubles, after its American depository receipts rose 2.6 percent to $2.82. The stock’s RSI rose to 25 after falling to 21.
The $2 trillion economy of Russia is expanding at the weakest pace since a 2009 contraction. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, limiting the central bank’s scope to cut interest rates, the Federal Statistics Service in Moscow said on June 4.
The ECB yesterday cut its growth forecast for this year, predicting the region’s economy will shrink 0.6 percent from an estimate of minus 0.5 percent made in March. Policy makers raised their 2014 forecast to show growth of 1.1 percent.
The Micex tumbled the most in a year on May 23, the day after Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce the pace of its asset purchases if officials see signs of sustained improvement in growth. The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates.
Russia’s economy will probably expand 2.3 percent in the second quarter, according to the median estimate of nine economists in a Bloomberg survey. That’s less than the 2.5 percent projection a month earlier. The Economy Ministry lowered this year’s growth forecast to 2.4 percent from 3.6 percent in April while the central bank kept its refinancing rate on hold for an eighth month in May.
OAO Sberbank, Russia’s biggest lender, increased 0.6 percent to 97.38 rubles. The bank’s five-month profit rose to 157 billion rubles ($4.85 billion) from 155 billion rubles, according to a statement today.
The Standard & Poor’s GSCI Index (SPGSCI) of commodities added 0.1 percent. Brent oil advanced 0.5 percent to $104.12 a barrel on the London-based ICE Futures Europe exchange while crude climbed 0.3 percent to $95.05 in New York, bringing a gain this week to 3.3 percent. Urals crude, Russia’s major export blend, increased 0.1 percent to $103.23.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex rose to 18.953 today. The Micex has lost 10 percent this year, underperforming benchmark indexes in India, China, Poland and Hungary.
The Russian Volatility Index tumbled 4.6 percent to 27.68. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. increased 0.5 percent to 85.87 yesterday.
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