- Currency has best weekly gain this year as oil advances
- Bond yields fall to 12-week low, stocks at three-week high
Russia’s stocks, bonds and currency posted weekly gains amid signs that political risks in the country are abating, paving the way for an easing of international sanctions tied to the Ukraine conflict.
The benchmark equities gauge in Moscow climbed to the highest level since Sept. 17 as energy shares advanced. Government bonds rose, with the yield on the five-year note dropping to a 12-week low. The ruble had its the best week since December.
The currency of the world’s largest energy exporter advanced as expectations for stronger oil demand buoyed crude prices. The prospects for peace improved in Ukraine where government troops and pro-Russian rebels pulled back tanks and light weapons as part of a truce. Trader speculation that a successful cease-fire will lead to an easing of sanctions on Russia helped Moscow-based borrowers to sell Eurobonds this week.
“We have been bullish on the ruble for the last week or so and the environment remains positive, mainly because of positive Ukraine sentiment,” Ivan Tchakarov, a Moscow-based economist at Citigroup Inc., said by e-mail. For further ruble gains, “we clearly need for oil not to disappoint from here on."
The currency weakened 0.6 percent to 61.77 per dollar Friday, paring its weekly increase to 6.6 percent. The Micex index of stocks rose 2.3 percent, extending the rally in the past five days to 7.2 percent.
The yield on five-year securities fell three basis points to 10.65 percent on Friday. Commerzbank AG raised its recommendation for Russian bonds to overweight from underweight, citing the calm in Ukraine.
Oil, which has traded below its 200-day moving average since July 2014, is moving closer to that landmark after Federal Reserve minutes indicated policy makers won’t rush to lift interest rates, making commodities priced in the dollar more attractive.
Even as Brent oil had its best week in six, technical studies suggested its rally will face resistance at $54-$55 per barrel, said Denis Davydov, an analyst at Nordea Bank AB in Moscow. That might spur some traders to unwind their positions in the ruble, he said in e-mailed comments.
“Oil has reached its first technical resistance levels, and it will be harder for it to move higher, you’ll need additional triggers,” Davydov said. “There will be additional volatility from the start of the earnings season in the U.S., so attempts to take profits are very likely. For the ruble it’s almost impossible to pass 60.”
Aeroflot PJSC jumped 4.1 percent. Russia’s largest airline last week decided against extending an offer for a 75 percent stake in smaller rival Transaero Airlines. Transaero is now headed for bankruptcy. Aeroflot’s shares fell the most in almost six months on Sept. 1 amid concern a deal will hurt its finances.