Russia Stocks Drop as Fed Sinks Commodities, Volatility Jumps

Russia’s Micex Index (INDEXCF) sank for a second day as commodities slumped after the U.S. Federal Reserve said it may curb stimulus this year, paring appetite for stocks in the world’s biggest energy exporter.

The country’s benchmark equities gauge lost 1.6 percent to 1,302.05 by 12:20 p.m. in Moscow. The Russian Volatility Index (RTSI$) climbed 14 percent to 32.73, the biggest jump since May 23. OAO Sberbank, Russia’s largest lender, dropped 3.1 percent to 91.60 rubles, poised for a Nov. 30 low. VTB Group declined 2.9 percent to 4.75 kopeks. Russia’s stocks have the cheapest valuations among 21 emerging markets tracked by Bloomberg.

Standard & Poor’s GSCI Commodities (SPGSCI) Index slumped 1.7 percent, the most since May 10, after Fed Chairman Ben S. Bernanke said the regulator will probably taper its $85 billion in monthly bond buying later in 2013 and halt purchases around mid-2014 as long as the world’s largest economy performs in line with projections. More than $2 trillion has been lost from global markets since May 22, when Bernanke signaled the asset-buying program may be trimmed.

“We might see new lows” before stock prices start recovering, Victor Bark, who oversees about $2.8 billion as the head of asset management at Alfa Capital in Moscow, said by phone. “The market is overreacting to the Fed comments, at some point in the next few days we’ll see a rebound.”

The conclusion to record U.S. stimulus may take years to complete as the Fed’s forecasts showed most officials don’t expect to begin raising the benchmark lending rate out of its lowest-ever range of zero to 0.25 percent until 2015.

Oil Falls

Commodities also dropped after a report showed China’s manufacturing shrank at a faster pace this month. Crude oil, Russia’s chief export earner, dropped 2 percent to $96.31, a second day of declines. Brent for August settlement tumbled 1.7 percent to $104.30 a barrel in London. Urals crude lost 0.5 percent to $104.48.

OAO Mechel (MTLR), a steelmaker and Russia’s biggest coking coal producer, retreated 2.8 percent to 94.50 rubles. Most metals fell in London.

The dollar-denominated RTS Index, which entered a bear market on June 5, dropped 3 percent to 1,252.93. Financial stocks were the biggest decliners among nine industry groups on the Micex, trading down 1.1 percent on average.

The 14-day relative strength index on the Micex fell to 40 after sliding to 31.4 last week, the closest since April to a level of 30, which signals a rebound to some analysts. On the Micex, 4 stocks increased and 46 dropped. The volume of shares traded on the gauge was 3.5 percent below the 30-day average, while 10-day price swings surged to 27.017, the highest since May 31.

Cheapest Valuations

Out of 50 stocks on the Micex, one closed yesterday at a 52-week low and none at highs, according to data compiled by Bloomberg. Twenty-two stocks, or 44 percent, were trading above their 50-day moving average.

The Micex trades at 4.9 times its 12-month estimated earnings, having lost 12 percent this year, compared with a multiple of 9.4 for the MSCI Emerging Markets Index, which is down 13 percent.

The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. dropped 2.2 percent to 85.06 yesterday.

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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