Russian stocks fell for the first time in five days as investors sold riskier assets on concern global growth may be slowing and as crude oil, the nation’s chief export earner, dropped.
The Micex Index retreated 1.5 percent to 1,407.02 by the close in Moscow, erasing earlier gains of 0.3 percent and trimming its monthly advance to 1.4 percent. OAO Novolipetsk Steel, the Russian steelmaker controlled by billionaire Vladimir Lisin, was the biggest decliner, falling 3.7 percent. Federal Grid Co. tumbled 3.5 percent as Russia’s high-voltage power transmission monopoly plans to offer 10 billion rubles ($311 million) of domestic bonds.
Crude oil, the nation’s chief export earner, fell as much as 1.6 percent, before trading at $88.78 in New York. Oil and gas contribute about 50 percent of Russia’s state revenue. The U.S. Federal Reserve and the European Central Bank meet this week as the International Monetary Fund said Europe’s debt crisis is likely to be prolonged. German unemployment climbed and business confidence fell to a two-year low this month, data showed today.
“Nobody wants to commit to Russia before the central banks’ meeting,” Tom Mundy, the chief equities strategist at Otkritie Capital, said by phone from Moscow. “The oil price is taking its cue from bad earnings and weak unemployment numbers.”
UBS AG, Switzerland’s biggest bank, said second-quarter profit fell 58 percent, missing analysts’ estimates. Deutsche Bank AG, Germany’s biggest bank, said second-quarter earnings at its investment bank slid 63 percent as revenue from trading and issuing securities shrank amid Europe’s debt crisis.
The Fed begins a two-day meeting today as U.S. government data showed personal spending stagnated in June, while a private report said consumer confidence topped economists’ estimates.
OAO Inter RAO UES tumbled 2.3 percent to 2.6 kopeks, as the company’s board approved an additional share issue. OAO Mechel declined 1 percent to 196.90 rubles, the most since July 25, after rallying 6.6 percent yesterday.
OAO Mobile TeleSystems, Russia’s biggest mobile phone operator, gained 0.9 percent to 247.70 rubles after falling as much as 1.5 percent as a license halt was extended for three months at its Uzbekistan unit and the operator’s president Andrey Dubovskov said the company may take legal action if the operation’s aren’t resumed.
OAO Rosneft declined 3.4 percent to 195.44 rubles. The country’s largest oil producer is due to post second-quarter earnings tomorrow. VTB Capital sees net income falling 66 percent from the previous quarter on the ruble weakening.
The earnings are “the most important company news this week for the Russian market,” Mundy said.
Polymetal International Plc dropped 0.7 percent after rising as much as 2.2 percent earlier in London. The Russian silver and gold producer in the U.K.’s FTSE 100 Index may increase its production plan for the year, Chief Executive Officer Vitaly Nesis said today.
Russian opposition leader Alexey Navalny faces as much as 10 years in jail after being charged with embezzlement today, marking an escalation in President Vladimir Putin’s crackdown on the biggest unrest of his 12-year rule.
The Investigative Committee increased the severity of the charges against Navalny, accusing him of defrauding a state timber company of 16 million rubles ($496,000) in the Kirov region, the agency said on its website today.
“It would not greatly perturb investors already active in Russia,” Chris Weafer, chief strategist at Troika Dialog, said by e-mail. “As always the damage from such events is that it keeps the larger pool of risk adverse investors outside the border. Yet these are the investors that Russia needs for the privatization programme and to raise investment generally.”
The Micex trades at 5.1 times estimated earnings, having gained 0.3 percent this year. That compares with a multiple of 9.8 times for companies in the MSCI Emerging Markets Index, which has added 4.2 percent this year.
Russian equities have the cheapest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.