Russia Stocks Fall First Day in Three on U.S. Default Concern

Russian stocks snapped two days of gains as utilities to commodity producers retreated after U.S. lawmakers remained deadlocked over extending the debt limit to avoid default.

The Micex Index (INDEXCF) declined 0.8 percent to 1,463.13 by 11:30 a.m. in Moscow. OAO Gazprom, the natural-gas export monopoly, fell 1.3 percent to 143.05 rubles. OAO Russian Grids dropped 1.9 percent to 93 kopeks.

With the U.S. set to exhaust measures to avoid breaching its debt ceiling on Oct. 17, House of Representatives Speaker John Boehner said lawmakers won’t raise the limit without packaging it with other provisions, a nonstarter for President Barack Obama. Utilities sank 1 percent on average, while basic materials and oil and gas shares lost 0.8 percent, data compiled by Bloomberg show.

“Boehner’s comments that Republicans are willing to go to the very end has created fear that the U.S. might actually default on its debt,” Slava Smolyaninov, a strategist at UralSib Capital in Moscow, said by phone. “Investors are fleeing risky assets. If economic growth in the U.S. slows, the Russian economy will also lose out. Materials, utilities’ shares are especially sensitive to this sentiment.”

A shutdown lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists in a Bloomberg survey. OAO Mechel (MTLR), Russia’s biggest coking coal producer, declined 1.4 percent to 102 rubles. Steelmaker OAO Severstal tumbled 1.1 percent to 277.30 rubles.

Crude oil, Russia’s chief export earner, fell 1.1 percent to $102.72 in New York. Russia receives about half of its budget revenue from oil and natural gas sales. Gazprom dropped 1.3 percent to $8.85 in London today.

Ten-day price swings on the Micex climbed to 13.661. Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.3 times projected 12-month earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index. The dollar-denominated RTS Index (RTSI$) lost 0.7 percent to 1,432.84.

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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