Russian stocks tumbled in overseas trading as the biggest contraction in industrial output since 2009 damped speculation that a recession this year won’t be as deep as forecast.
OAO Sberbank fell 3.9 percent to a one-month low in London after VTB Capital cut its target price for the lender’s preferred shares. OAO Uralkali slid 2.7 percent as Sberbank CIB lowered its rating on the stock to a sell. The Bloomberg Russia-US Equity Index slid 1.1 percent in New York.
Output at factories, mines and utilities shrank 4.5 percent in April from a year earlier, government data showed Wednesday. The decline exceeded every forecast in a Bloomberg survey of 24 analysts, whose median estimate was for a 1.2 percent drop. The report came less than a week after figures showing a smaller-than-forecast contraction in gross domestic product in the first quarter fueled speculation that the country will endure a milder recession than projected this year.
“The economic slump turned out to be less than everyone expected, but what the market is really interested in seeing -- signs of the potential for future economic growth -- are not there,” Aleksei Belkin, the chief investment officer at Kapital Asset Management LLC, said by phone from Moscow on Wednesday. “Investors are afraid the market will get bogged down in a prolonged economic slump with high interest rates and inflation.”
Economists surveyed by Bloomberg estimate that Russia’s GDP will shrink 4 percent this year amid lower oil prices and sanctions linked to the Ukraine conflict. The economy contracted 1.9 percent in the first quarter, data showed on May 15.
Policy makers in December pushed the key interest rate up 6.5 percentage points to 17 percent, the biggest increase since Russia’s 1998 default, to stem declines in the ruble. They have since lowered it to 12.5 percent. Annual inflation slowed to 16.4 percent in April from 16.9 percent in the prior month, which was the fastest since 2002.
Sberbank slid to $5.71 in London. VTB analysts Jason Hurwitz and Svetlana Aslanova cut the company’s preferred shares target price by 7 percent, citing an exclusion of the share class from the MSCI Russia Index after May 29. Uralkali dropped to $14.93.
The Market Vectors Russia ETF, the largest exchange-traded fund tracking the nation’s stocks, slipped 1.5 percent to $19.85 in New York. Futures on the dollar-denominated RTS Index increased 0.4 percent to 102,770 in U.S. hours.