Futures Gain as Mechel Discount Swells: Russia Overnight

Futures on Russia’s RTS Index climbed in New York as the prospect of a resolution to the U.S. budget crisis bolstered riskier assets and as crude gained.

Contracts on the RTS expiring in December rose 0.4 percent to 138,010 in U.S. trading hours on Nov. 16 and expected swings in the futures slid for a third day. The Bloomberg Russia-US Equity Index of the most traded Russian shares in New York jumped 1.3 percent to 90.77, trimming its second weekly drop to 0.7 percent. OAO Mechel traded at the biggest discount to Moscow in seven weeks after MSCI Inc. said Nov. 15 it will be moved from its Russia Large Cap Index to its Mid Cap gauge.

Russia’s benchmark Micex Index has fallen 4.3 percent since President Barack Obama’s re-election stoked concern the Republican Party would block negotiations to avert $607 billion of tax increases and spending cuts next year. Talks Nov. 16 over the so-called fiscal cliff were “constructive,” U.S. House Speaker John Boehner said. Crude, Russia’s biggest export earner, soared to an eight-day high.

“Incremental progress on the fiscal cliff negotiations in Washington helps the outlook for global demand, which bodes well for Russia and its natural resources,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone in New York on Nov. 16. “Oil is getting a bit of a boost here because of the Middle East fighting but the more important factor is demand, and sentiment on that front picked up on a sense that the fiscal cliff talks are progressing.”

Missiles Landing

Obama said at a news conference in Bangkok yesterday that he was “confident” that he and Congress would reach a budget agreement.

Crude oil added 1.4 percent to $86.67 on the New York Mercantile Exchange on Nov. 16, as Israel extended its bombing of the Gaza Strip and Palestinian missiles landed around Jerusalem and Tel Aviv. Urals crude, Russia’s chief export blend, gained 1.1 percent to $108.32 while Brent crude climbed 0.9 percent to $108.95 on prospects fighting in the Middle East will disrupt oil shipments from the region.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, advanced 1.6 percent to $26.97 on Nov. 16 in New York, paring its decline for the week to 0.6 percent. The RTS Volatility Index, which measures expected swings in stock futures, slipped 1 percent to 25.67 points.

Mechel, Russia’s largest coal producer for steelmakers, fell 2.2 percent to $5.84 in New York to extend its retreat for the week to 6.9 percent. Shares in Moscow slid 2.2 to 191.70 rubles, or the equivalent of $6.05. One ADR represents one ordinary share.

Oil Producers

The MSCI Russia Large Cap gauge has fallen 1.1 percent this year. State-backed OAO Gazprom, Russia’s biggest company and the world’s premier natural gas exporter, makes up 24 percent of the index, followed by OAO Lukoil, the largest non-state oil producer, and OAO Sberbank, the No. 1 lender. Moscow-based Mechel, which has a market value of $2.4 billion, has the lowest weighting at 0.4 percent.

American depositary receipts of Russian oil companies rose on Nov. 16, paring slumps in the week.

OAO Surgutneftegas, Russia’s fourth largest crude producer, gained 1.2 percent to $5.93, trimming its decline for the week to 3.9 percent. Surgutneftegas shares in Moscow lost 4.8 percent in the five days to 18.86 rubles, the equivalent of 59 cents. One ADR equals 10 ordinary shares.

OAO Gazprom Neft, the oil arm of Russia’s gas export monopoly, climbed 1.4 percent to $22.80 on Nov. 16 to pare its retreat for the week to 1.7 percent. Shares in Moscow slipped 2.3 percent on the week to 143.82 rubles, or the equivalent of $4.54. One ADR equals five ordinary shares.

Brokerage Upgrade

ADRs of OAO Mobile TeleSystems were the biggest gainers on the Bloomberg-US measure on Nov. 16, climbing 3.7 percent to $17.18 after Deutsche Bank AG raised its rating to buy from hold. MTS, as the Moscow-based company is known, plans to sell company real estate in Moscow to support margins, acting finance director Joshua Tulgan said on Nov. 16 at a Morgan Stanley conference in Barcelona.

Futures contracts on the ruble were little changed at 31.850 per dollar in New York on Nov. 16, after the ruble weakened 0.2 percent to 31.7250 versus the greenback in Moscow.

United Co. Rusal, the world’s largest aluminum producer, dropped 0.9 percent to HK$4.39 in Hong Kong trading as of the city’s noon trading break. The MSCI Asia Pacific Index gained 1.1 percent today.

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