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Russia Stocks Fall Most in Two Weeks as Rates Held, Crude Slides

Russian stocks sank the most in more than two weeks after oil, the country’s main export earner, fell and metal producers paced declines as the central bank held rates unchanged for a 12th month.

The Micex Index lost 0.7 percent to 1,440.74 by the close in Moscow, paring its gain to 1.2 percent in the week. OAO Mechel, Russia’s largest producer of coal for steelmakers, retreated 3.8 percent to 110 rubles. United Co. Rusal, the world’s biggest aluminum producer, declined 3.9 percent to 97.83 rubles.

Russia’s central bank kept the refinancing rate unchanged at 8.25 percent at a meeting today, matching the forecast of 14 out of 22 economists in a Bloomberg survey. Crude fell 0.9 percent to $107.64 a barrel in New York as the U.S. and Russia held talks on a plan for Syria to surrender its chemical weapons. Stocks rallied the most last week since December 2011 amid concern a possible U.S. strike on Syria would disrupt supplies from the Middle East.

“We’re seeing commodities weakening, which is causing the stock market to retreat,” Slava Smolyaninov, a strategist at UralSib Capital in Moscow, said by phone. “Russia saw a strong bounce amid the Syria tensions.”

Russia receives about half of its budget revenue from oil and natural gas sales. The Micex climbed 4.3 percent last week. Standard & Poor’s GSCI Index fell 0.7 percent today.

Rates Meeting

Bank Rossii, which estimates inflation will slow to 5 percent to 6 percent by year-end, said consumer-price growth decelerated to 6.3 percent from a year earlier as of Sept. 9, according to today’s statement. In a separate announcement, the bank said it will introduce a new one-week key policy rate by unifying its rates on providing and absorbing liquidity. The refinancing rate will be adjusted to the level of the new rate by Jan. 1, 2016.

The Economy Ministry, which is seeking ways to curb consumer-price growth and spur expansion, has proposed freezing utility prices next year. President Vladimir Putin supported the measure at a budget meeting on Sept. 11, Economy Minister Alexei Ulyukayev told reporters.

“The decision on the tariff freeze will likely be put into force, this will reduce inflation risks for the central bank,” Smolyaninov said. “The central bank is running out of excuses not to cut rates.”

OAO Gazprom tumbled 2 percent to 142.10 rubles. Russia’s biggest company fell 1.9 percent to $8.71 in London. OAO RusHydro declined 2.9 percent to 53.75 kopeks. The shares retreated 3.2 percent to $1.598 in London.

Russia’s economy expanded 1.2 percent in the second quarter, the Federal Statistics Service reported on Aug. 9, missing the median forecast for 2 percent.

Uralkali Drops

OAO Rostelecom gained as much as 2.3 percent, closing up 0.2 percent to 104.71 rubles. Russia’s state-run phone company advanced as its board set the maximum value of the options deals in a sale of a stake to Deutsche Bank AG and the Russian Direct Investment Fund at $280 million, above the $241 million reported by Kommersant earlier.

OAO Uralkali, the world’s biggest potash producer, declined 1.7 percent to 177.80 rubles. The stock lost 0.9 percent to $27.34 in London. Belarus will keep Uralkali’s Chief Executive Officer Vladislav Baumgertner in detention in Minsk, according to his lawyer Dmitry Goryachko after the hearing.

Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg, with shares trading at 3.8 times 12-month estimated earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.

The volume of shares traded on the Micex was 22 percent above the 30-day average, while 10-day price swings rose to 20.341.

The dollar-denominated RTS Index lost 0.3 percent to 1,396.57. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York was little changed today, along with Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund.

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