Ruble Snaps Three-Day Retreat on Bets Ukraine Incursion Unlikely

The ruble and Russian bonds gained for the first time in four days, while stocks advanced, on speculation Russia won’t extend its incursion in Ukraine.

The currency strengthened 0.6 percent against the dollar to 35.9910 at 8:30 p.m. in Moscow. The yield on local debt due February 2027 fell five basis points to 9.19 percent, following a 32 basis-point increase in the three previous days. The Micex Index (INDEXCF) gained 0.9 percent to 1,322.60 by the close in Moscow.

The U.S. isn’t likely to move forward with new sanctions until after talks in Geneva between the U.S., Russia, the European Union and Ukraine, a State Department spokeswoman said yesterday. One protester was wounded and no one was killed as a military operation started against pro-Russian groups in east Ukraine, according to an adviser to the country’s interior ministry. Russian state television reported that as many as 11 militants were killed.

“There’s optimism in the market as Russia isn’t interfering in Ukraine militarily and the U.S. said it won’t announce sanctions until the Thursday meeting,” Mansur Mammadov, a money manager at Kazimir Partners in Moscow, said by phone.

The ruble advanced 0.3 percent against the central bank’s target basket of dollars and euros to 42.2811. It pared its decline against the greenback since the beginning of the year to 8.7 percent. That’s the worst performance after Argentina’s peso among 24 developing-nation currencies.

Sanctions Bets

Equities on the Micex trade at the cheapest valuations among 21 developing countries monitored by Bloomberg. OAO M.Video rose 4.7 percent to 222.62 rubles. The nation’s biggest electronics retailer said first-quarter sales climbed 8 percent from a year earlier. OAO Gazprom, the natural-gas export monopoly, climbed 1 percent to 129 rubles.

Tension intensified over the weekend after clashes between Ukrainian security personnel and separatists who have seized police and government buildings in the country’s east. The Micex tumbled yesterday, the Finance Ministry canceled a bond auction and the ruble fell to the lowest level in three weeks.

Preparation work for more Russia sanctions is at an advanced stage, Maja Kocijancic, a spokeswoman for EU foreign-affairs chief Catherine Ashton, said today.

“The situation leaves investors hanging in the air,” Stanislav Kopylov, who helps manage 45 billion rubles ($1.2 billion) at UralSib Asset Management in Moscow, said by phone.

Russian President Vladimir Putin, who plans to hold a televised call-in news conference tomorrow, is getting appeals for help from eastern Ukrainians alongside questions about why Russia isn’t taking action, his spokesman, Dmitry Peskov, told reporters yesterday. Putin has parliamentary approval to deploy troops in Ukraine to protect the rights of Russian-speakers and those of Russian heritage.

Putin “may calm down the markets” tomorrow, Pavel Demetchik, a foreign-exchange trader at ING Groep NV in Moscow, said in e-mailed comments. “It’s a normal correction after yesterday’s very strong move.”

To contact the reporters on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net Alex Nicholson, Daliah Merzaban

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