• Gauge of U.S.-traded Russian stocks falls to seven-month low
  • The Market Vectors ETF declines to lowest since March

Russian stocks in New York fell to a seven-month low as resumed fighting in eastern Ukraine coupled with plunging oil prices further dimmed sentiment for the country reliant on energy sales and mired in recession.

A Bloomberg index of the most-traded Russian stocks in the U.S. slid 1.6 percent to 49.57 in New York, the lowest since January. The Market Vectors Russia ETF, the biggest exchange-traded fund that tracks the nation’s equities, slid to the lowest since March.

Investors, who were tentatively returning to Russia after the world’s biggest stock slump in 2014, are retreating as the 16-month conflict risks flaring up again. This comes as international sanctions continue to choke the economy and crude, which together with natural gas accounts for half the nation’s budget revenue, is trading at about half its five-year average.

“The floor is open for an even deeper retreat in the market,” Sergei Pigarev, an analyst at Rye, Man & Gor in Moscow, said by phone on Tuesday. “It’s hard to predict a ruble and oil move, but it’s impossible to predict what’s going to happen in eastern Ukraine, and for those investors still interested in Russia, this level of uncertainty might be too much.”

Economic Slump

Russia’s economy is shrinking after energy prices fell and sanctions linked to the Ukraine conflict curbed international financing. Gross domestic product contracted 4.6 percent from a year earlier after a 2.2 percent drop in the first three months of the year.

Ukrainian President Petro Poroshenko and European Commission President Jean-Claude Juncker will meet in Brussels before the end of August as Russia’s Foreign Ministry predicted a deterioration in Ukraine.

The Market Vectors Russia ETF dropped 0.5 percent to $16.14. Its relative strength index is hovers around 37, near the level of 30 that some technical analysts see as a signal it’s set to rise.

International Sanctions

The U.S. and the European Union have imposed financing restrictions, export bans and other measures to punish Russian President Vladimir Putin, who they say is supplying rebels in eastern Ukraine with weapons, cash and troops. The Kremlin denies the accusations.

The ruble, which rallied the most in the world earlier this year, weakened 0.6 percent to 65.8810 against the dollar. It has dropped 19 percent in the past two months as oil prices tumbled 24 percent. Brent for October settlement added 0.1 percent to $48.81 a barrel on the London-based ICE Futures Europe exchange on Tuesday.

The dollar-denominated RTS Index slid 1.9 percent to 809.64, a six-month low. Futures on RTS Index expiring in September added 0.1 percent to 81,010 in U.S. hours.

“If the situation in Ukraine escalates, the ruble alone won’t be able to withstand the pressure, and there is a chance we might witness a ubiquitous decline in Russia’s equities,” Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow, said by phone.

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