Futures Slip on Oil as Europe Economy Shrinks: Russia Overnight

Futures Slip on Oil as Europe Economy Shrinks
OAO Mechel is Russia’s largest producer of coal for steelmakers. Photographer: Andrey Rudakov/Bloomberg

Russian stock futures tumbled and U.S.-traded shares slid the most in three months as falling oil prices and shrinking European growth dimmed the outlook for the world’s largest energy exporter.

Futures expiring in March on Moscow’s RTS Index dropped 1.1 percent in U.S. trading to 164,560, while the Bloomberg Russia-U.S. 14 Index of Russian companies traded in New York slipped 4.4 percent to 109.40, the biggest one-day drop since Dec. 6, led by OAO Mechel and OAO RusHydro.

The prospect supplies from the Middle East won’t be interrupted by a conflict with Iran sent crude, Russia’s biggest export earner, to a two-week low as the European Union offered to restart negotiations over the nation’s disputed nuclear program. Gross domestic product in the euro region shrank 0.3 percent in the fourth quarter, the first contraction since mid-2009, boosting concern Russia’s biggest trading partner is showing the strain of the regional debt crisis.

“A slowdown in Europe will damp the outlook for commodity prices and that’s the main driver for the Russian market,” Marco Casas, vice-president of equity sales at Otkritie Financial Corp. in New York, said by phone yesterday. “Oil being down has a clearly negative effect.”

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, tumbled 5.8 percent to $31.20, the biggest slide since Dec. 6, data compiled by Bloomberg show. The RTS Volatility Index, which measures expected swings in the index futures, climbed 8 percent to 37.89 points, the highest level since Jan. 19.

Coal Demand

Mechel, Russia’s largest producer of coal for steelmakers, slid the most in more than two months in U.S. trading on concern demand for coking coal will decline as Chinese economic growth slows. Mechel’s American depositary receipts sank 8.1 percent to $9.70 in New York. The ADRs are trading at a 2.1 percent discount to the company’s Moscow-listed shares.

Mechel was the biggest decliner on the Bloomberg Russia-U.S. 14 measure. The company’s stock listed on Moscow’s Micex Index lost 10 percent to 293.70 rubles yesterday, or the equivalent of $9.91. One ADR represents one ordinary share.

Moscow-based Renaissance Capital expects coking coal prices to average $219 a metric ton in 2012, compared with $289 last year, according to equity analyst Vasiliy Kuligin.

“Mechel makes most of its revenue from selling coking coal,” Kuligin said by phone from Moscow. “China won’t need as much coking coal as was previously thought and the coking coal price will continue to weaken, hurting Mechel further.”

Commodities Slump

ADRs of RusHydro, Russia’s largest hydropower producer, declined 6.7 percent to $3.91, the biggest drop since Dec. 19. The company’s Moscow-traded stocks snapped a four-day advance, slipping 2.4 percent to 1.1795 rubles, or the equivalent of 4 cents.

The Standard & Poor’s GSCI index of 24 raw materials dropped 1.5 percent to 692.61 yesterday, the biggest loss since Dec. 14, as aluminum, copper and nickel retreated. Chinese Premier Wen Jiabao reduced China’s economic growth goal for 2012 to 7.5 percent on March 5, from 8 percent over the past seven years, as the European crisis and sluggish U.S. recovery curb global demand.

OAO GMK Norilsk Nickel, Russia’s biggest mining company, fell 6 percent to $18.84 in New York, a 1.2 percent discount to its shares in Moscow, the most since Dec. 19. One ADR is equal to one-tenth of an ordinary share. Norilsk fell 4.8 percent to 5,656 rubles, or the equivalent of $190.90, on the Micex yesterday.

Yandex Search Share

The 30-stock Micex slumped 3.9 percent to 1,562.19 yesterday, the biggest drop since Dec. 9. The RTS decreased 4.3 percent to 1,676.48. Police detained more than 200 demonstrators on March 5 after Prime Minister Vladimir Putin won six years as president in a March 4 election international observers criticized as unfair.

Yandex NV, Russia’s most popular Internet search engine, slipped as data showed the company failed to increase its share of the Russian online search market above a four-week average in the week to March 4, while Google Inc.’s portion grew. Yandex dropped 0.3 percent to $23.13 in New York.

“Audience size is a money question for Yandex,” as the company gets most of its revenue from advertising, Iouli Matevossov, a senior analyst at Alfa Bank in Moscow who rates the stock “equal-weight,” said by phone yesterday. “It’s a question of Yandex’s ability to prevent Google from winning an even bigger share of the market.”

Crude Tumbles

The Hague, Netherlands-based Yandex’s share of Russian Internet searches was 59.3 percent in the week to March 4, matching the average share level over the past four weeks, according to Liveintenet.ru, an Internet-service provider and researcher. Google’s share rose to 25.7 percent in the week to March 4, compared with a four-week average of 25.5 percent, the data showed.

Crude for April delivery fell 1.9 percent to $104.70 on the New York Mercantile Exchange yesterday, the lowest settlement since Feb. 17. Futures are up 5.9 percent this year. Brent oil tumbled 1.5 percent to $121.98 on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, fell 1.4 percent to $121.12 yesterday, the lowest since Feb. 28.

Russia’s central bank is scheduled to publish monthly foreign-currency reserves and weekly money supply data today. OAO Novatek, Russia’s largest independent gas producer, reports 2011 and fourth-quarter earnings.