Russian stocks dropped for a second day as consumer services and financial shares declined before a central bank interest rates meeting and as U.S. lawmakers struggled over an agreement to raise the nation’s debt limit.
The Micex Index (INDEXCF) fell 0.4 percent to 1,506.53, by 11:32 a.m. in Moscow. The dollar-denominated RTS sank 0.4 percent to 1,470.90, after rising 20 percent from this year’s low to enter a bull market on Oct. 10. OAO Sberbank, the nation’s biggest lender, lost 0.6 percent to 102.14 rubles. OAO Magnit, its largest food retailer, traded down 1.3 percent at 8,440 rubles.
Russia’s central bank will probably leave borrowing costs unchanged for a 13th month, holding the one-week auction rate, its new benchmark introduced last month, at 5.50 percent at today’s meeting, according to all 23 economists in a Bloomberg survey. With the U.S.’s borrowing authority set to lapse Oct. 17, Senate leaders in Washington sought a pact to avert a default and re-open the government.
“Russia’s central bank has acted quite conservatively even in better times,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “I expect it to keep rates unchanged amid the U.S. budget turmoil.”
Above-target inflation has prevented Russia’s central bank from countering a slowdown in economic growth to the weakest pace since a 2009 contraction. U.S. Senate Majority Leader Harry Reid was negotiating with Minority Leader Mitch McConnell after talks between President Barack Obama and House Speaker John Boehner broke down.
Crude, Russia’s main export earner, traded up 0.4 percent at $102.39 in New York. Russia receives about half of its revenue from the oil and natural gas industries. Sberbank dropped 0.8 percent to $12.65 in London and Magnit retreated 1.2 percent to $62.50.
OAO Alrosa shares jumped 1.7 percent to 35.40 rubles, the most on the Micex. The world’s biggest diamond producer announced the price range for its offering at between 35 and 38 rubles today and said the final price will be announced on Oct. 28, according to the statement. The company said on Oct. 2 that the Russian government and Republic of Yakutia will sell a combined 14 percent stake and the company will also sell about 2 percent of treasury stock itself.
Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.4 times projected 12-month earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex rose to 14.99 from 14.179 on Oct. 11.
The Bloomberg-Russia-US gauge lost 0.3 percent to 101.31 on Oct. 11. The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund that holds Russian shares, tumbled 0.6 percent to $29.42 for the week.
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