Russia Stocks Rise Before Rates Meeting, Crude Prices Climb

Russian shares climbed for a second day as crude oil, the nation’s chief export earner, traded near the highest level in more than two weeks. Bank Rossii holds a meeting to review rates today.

The ruble-based Micex Index (INDEXCF) added 0.2 percent to 1,346.58 by 10:23 a.m. in Moscow after losing 0.5 percent last week. VTB Group, Russia’s second-biggest lender, increased 1.8 percent to 4.84 kopeks. OAO Severstal, Russia’s second-largest steelmaker, added 1.3 percent to 240.50 rubles.

Crude, which together with natural gas contributes 50 percent of Russia’s budget revenue, traded at $96.07 amid speculation demand will improve in the U.S. as data showed U.S. employers added more workers than expected to payrolls in May. Central bank chairman Sergey Ignatiev, who presides today over his last policy meeting after leading the regulator for more than a decade, has signaled that he will leave the first reductions to Russia’s main lending rates since 2011 to his successor, Elvira Nabiullina, who becomes chairman June 24.

“We will likely see only medium-term rates cut, similar to the previous two meetings, although the importance of such a step for the money market would increase this time,” VTB Capital analysts led by Maxim Oreshkin, said in an e-mailed note.

The dollar-denominated RTS index, which last week entered a bear market, was steady at 1,314.98. On the Micex, 31 stocks increased while ten dropped and nine were little changed.

The volume of shares traded on the gauge was 20 percent below the 30-day average, while 10-day price swings subsided to 20.584.

Inflation Quickens

Bank Rossii will hold the refinancing rate at 8.25 percent for a ninth month, according to 22 of 26 economists in a Bloomberg survey. Four forecast a quarter-point cut. 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 Micex tumbled the most in a year on May 23, the day after the Federal Reserve Chairman Ben S. Bernanke suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.” 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.

Cheapest Valuations

Urals crude, Russia’s major export blend, increased 1 percent to $104.13. The Standard & Poor’s GSCI Index (SPGSCI) of commodities lost 0.2 percent. Brent oil was little changed at $104.54 a barrel on the London-based ICE Futures Europe exchange.

Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5 times its 12-month estimated earnings, having lost 8.6 percent this year, compared with a multiple of 10 for the MSCI Emerging Markets Index, which is down 7.3 percent.

The Russian Volatility Index surged 7.6 percent to 27.24. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. increased 1.5 percent to 87.14 on June 7.

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

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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