Russian shares had their biggest gain in three weeks led by OAO Mechel, which rallied from a four-year low, as oil increased for a third day.
The ruble-based Micex Index added 2 percent, the most since May 17, to 1,343.90 by the close in Moscow, trimming a decline this week to 0.5 percent. Mechel, the nation’s biggest coking coal producer, snapped a seven-day drop of 26 percent. Crude, which together with natural gas contributes 50 percent of Russia’s budget revenue, was set for its first weekly gain in a month.
“The Russian market was oversold on fears the global stimulus program will be curbed,” Vitaly Kupeev, an analyst at Allianz Investments in Moscow, said by phone. “Oil is trading at high levels; if it continues to rise, Russian stocks will recover. Mechel was completely sold off; now investors are buying the stock.”
European Central Bank President Mario Draghi yesterday said the region’s economy should stabilize and that more stimulus measures were being left “on the shelf.” Europe is Russia’s biggest trade partner. The Micex’s 14-day relative strength index climbed to 42 from 34 yesterday after payrolls increased more than forecast in the U.S., the world’s biggest crude consumer.
The RTS’s RSI rose to 38 from 30, the level which indicates to some analysts that an index is poised to advance. The index, which this week entered a bear market, rallied 2.1 percent to 1,314.41, the most since May 3. On the Micex, 47 stocks increased while three dropped.
Russia-dedicated funds posted $117 million in outflows in the week ended June 5, according to an e-mailed note from UralSib Capital, which cited EPFR Global data. This is the second consecutive week of outflows, after Russia-dedicated funds lost $78 million the week earlier.
The volume of shares traded on the Micex was 44 percent below the 30-day average. Mechel increased 11 percent to 95.20 rubles, the most since Sept. 14 while its American depositary receipts rose 7.1 percent to $3.02 today. The Moscow-traded stock’s RSI rose 13 points to 34.
The $2 trillion economy of Russia is expanding at the weakest pace since a 2009 contraction. Inflation in Russia accelerated for a second month in May to the fastest pace in 21 months, limiting the central bank’s scope to cut interest rates, the Federal Statistics Service in Moscow said on June 4.
Bank Rossii in Moscow will hold the refinancing rate at 8.25 percent for a ninth month at its June 10 meeting, according to 22 of 26 economists in a Bloomberg survey. Four forecast a quarter-point cut.
The Micex tumbled the most in a year on May 23, the day after the Federal Reserve Chairman Ben S. Bernanke suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.” The Fed buys $85 billion of debt a month to support the economy by putting downward pressure on interest rates.
The ECB yesterday cut its growth forecast for this year, predicting the region’s economy will shrink 0.6 percent from an estimate of minus 0.5 percent made in March. Policy makers raised their 2014 forecast to show growth of 1.1 percent.
Russia’s economy will probably expand 2.3 percent in the second quarter, according to the median estimate of nine economists in a Bloomberg survey. That’s less than the 2.5 percent projection a month earlier. The Economy Ministry lowered this year’s growth forecast to 2.4 percent from 3.6 percent in April while the central bank kept its refinancing rate on hold for an eighth month in May.
OAO Sberbank, Russia’s biggest lender, increased 2.3 percent to 99.05 rubles. The bank’s five-month profit advanced to 157 billion rubles ($4.85 billion) from 155 billion rubles, according to a statement today.
Crude oil rose 1 percent to $95.75 a barrel in New York, bringing a gain this week to 4.1 percent as a report showed U.S. employment increased more than forecast. Urals crude, Russia’s major export blend, increased 0.1 percent to $103.23. Brent oil jumped 0.7 percent to $104.37 a barrel on the London-based ICE Futures Europe exchange. The Standard & Poor’s GSCI Index of commodities added 0.3 percent.
Russian equities have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The Micex trades at 5 times its 12-month estimated earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex rose to 22.624 today. The index has lost 8.9 percent this year, underperforming benchmark indexes in India, China, Poland and Hungary.
The Russian Volatility Index tumbled 13 percent to 25.31. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. increased 1.1 percent to 86.77 today.