Russian stocks traded in New York are set for their biggest monthly plunge since May after a slump in commodities sank OAO Mechel and OAO GMK Norilsk Nickel.
The Bloomberg Russia-US Equity Index of the most traded Russian equities in New York fell 0.5 percent to 100.10 yesterday, extending the gauge’s slump this month to 5.1 percent. Mechel, the nation’s biggest maker of steelmaking coal, declined to the lowest level in seven months as Norilsk, the world’s largest producer of nickel, dropped 9.9 percent in February. Futures expiring next month on Moscow’s dollar-denominated RTS equity index rose 0.3 percent during New York hours to 153,300.
Oil retreated 5 percent this month and commodities dropped the most since October as inconclusive elections in Italy spurred concern that Europe’s debt crisis may worsen a week after minutes from the Federal Reserve’s meeting showed policy makers were divided over its bond buying program. Europe, Russia’s biggest trading partner, accounts for about half of OAO Gazprom’s total energy sales.
“We are facing a lot of uncertainty over Italy, as it may take them months to get a functional government, while the EU is the main market for Russian exports,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone from New York yesterday. “Russian equities fell as commodities declined.” There were “some concerns over the premature end to the program, following the release of minutes by the Federal Reserve last week,” he said.
The Russia-US gauge sank 22 percent in May, the biggest retreat since 2008, as German business confidence fell more than economists forecast and speculation Greece might leave the euro area clouded the economic outlook.
The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund that holds Russian shares, gained 0.9 percent to $29.05 yesterday. The RTS Volatility Index, which measures expected swings in the index futures, was little changed at 22.04.
Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases in his testimony to the Senate Banking Committee in Washington yesterday, saying they are supporting the expansion with little risk of inflation. Bernanke used his testimony to push back against colleagues on the Federal Open Market Committee who favor curtailing the $85 billion in monthly bond-buying.
Italy’s Democratic Party leader Pier Luigi Bersani won in the Chamber of Deputies by a margin of less than half a percentage point over former Prime Minister Silvio Berlusconi and will fall short of controlling the Senate. A political stalemate would threaten to derail 15 months of austerity under Prime Minister Mario Monti’s government, reviving speculation the country will struggle to pay its debt.
Oil, Russia’s biggest export earner, fell 0.5 percent to $92.63 a barrel in New York yesterday, while the Standard & Poor’s GSCI raw materials index dropped 0.8 percent to a one-month low of 653.56. Brent crude for April settlement on the ICE Futures Europe exchange declined 1.5 to $112.71 a barrel. Urals crude slid 0.7 percent to $110.10, to cap a 3.8 percent retreat in February.
“Oil price is an extremely strong factor when it comes to Russian equities in every sector of the economy,” Mark Rubinstein, the head of research at IFC Metropol in Moscow, said by phone yesterday. “As oil price drops, investors’ appetite for Russian risk vanishes.”
American depositary receipts of Mechel sank 1.2 percent to $5.58, the lowest level since July 25. The ADRs are down 17 percent this month. The ruble-denominated Moscow-listed stock tumbled 2 percent to 174.60 rubles, or the equivalent of $5.70.
Norilsk retreated 2.3 percent to $17.91 in New York after shares lost 1.4 percent to 5,493 rubles, or the equivalent of $179.05 in Moscow. One ADR equals one-10th of a share.
Gazprom, the world’s biggest producer of natural gas and Russia’s largest company, fell 0.4 percent to $8.91 in New York. The company dropped 1.1 percent to 136.52 rubles, or $4.46, in Moscow yesterday. One ADR equals two shares.
Russia’s ruble declined 0.4 percent to 30.6345 per dollar, the weakest level since Dec. 25. The currency lost 0.3 percent to 34.8557 against the dollar-euro basket used by Russia’s central bank to manage swings that erode exporter competitiveness.
United Co. Rusal, the world’s largest aluminum producer, climbed 1.8 percent to HK$4.46 in Hong Kong trading as of 11:03 a.m. local time. The company said yesterday that $7 million in claims by Russia’s tax service against Rusal’s foil unit were “unjustified” and that it will appeal a court decision that led to a search of its Moscow office.