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Russia Stocks Extend Bull-Market Gains as Gazprom Seeks Payment

Most Russian stocks rose after entering a bull market last week as OAO Gazprom climbed on speculation the natural gas-export monopoly will secure outstanding payments from Ukraine following talks today.

The Micex Index gained as much as 0.9 percent before ending little changed at 1,485.39, following a 3.7 percent jump last week that took the measure 20 percent above its March 14 low. Gazprom, which has the biggest weighting on the 50-member gauge, rose 0.3 percent. OAO Megafon rallied 4.4 percent after signing a deal to pre pay $1.06 billion of a $1.18 billion debt related to its acquisition of data operator Scartel.

Gazprom has raised pressure on state-run NAK Naftogaz Ukrainy to pay part of its outstanding bill or face a supply cut-off. Russia, Ukraine and the European Union will hold talks in Brussels today over the payments, with Russian newspaper Vedomosti saying that Naftogaz may pay about $1 billion, citing two unidentified people. In April, Gazprom raised Ukraine’s gas price 81 percent to $485 per thousand cubic meters.

“For Gazprom, any resolution leading to Ukraine paying back its debt is a positive, as long as the price is above $340 per thousand cubic meters,” Alexei Kokin, an analyst at UralSib Capital in Moscow, said in an e-mailed note. An agreement would be beneficial “even if the 30 percent export duty is charged on these exports,” he said.

Russia, Ukraine and the EU will hold talks at 7 p.m. in Brussels today to end the dispute, said Olga Golant, a spokeswoman at Russia’s Energy Ministry. Russia and Ukraine are close to a compromise, she said, without elaborating.

Trimming Gains

The Micex pared an advance of as much as 0.9 percent after its relative strength index rose above 70, the threshold that signals to some analysts that a security is overbought. The RSI closed at 68.9 and the gauge’s 90-day historical volatility was little changed at 29.97, according to data compiled by Bloomberg.

“People started taking profits from the strong gains,” Anvar Gilyazitdinov, who manages a $10 million portfolio of Russian stocks at Rye, Man & Gor Securities, said by phone from Moscow.

The Micex rallied last week as Group of Seven leaders spared Russia further sanctions in favor of diplomatic efforts to resolve the standoff over Ukraine. Those penalties have exacerbated the economic slump in the world’s biggest energy exporter, with the head of Russia’s largest bank saying on June 6 that he sees an “acute” cash squeeze in the banking system.

Slower Growth

The country’s economy is set to expand 0.7 percent in 2014, the slowest pace since the 2009 recession, according to the median of 40 estimates compiled by Bloomberg. Of the measure’s 50 shares, 24 fell today. OAO Mobile TeleSystems, Russia’s largest wireless operator, declined 1.9 percent, while OAO Alrosa dropped 1.6 percent.

“The market will be closely watching events in eastern Ukraine since Poroshenko has called for an end to the military operation this week,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group in Moscow, said by phone.

Russian stocks, the cheapest among 21 emerging markets tracked by Bloomberg, rose for a second day after Ukraine’s new leader, Petro Poroshenko, met Russian President Vladimir Putin.

Poroshenko said the violence that has claimed hundreds of lives in eastern Ukraine must end this week as peace talks including an envoy Putin’s began. Tension between the two countries has worsened since Russia annexed Ukraine’s Crimea peninsula in March, prompting the U.S. and European Union to impose some sanctions.

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