Russia Stocks Fall Amid U.S. Budget Concern as Rates Unchanged

Russian stocks dropped for a second day as the central bank left its main lending rate unchanged and U.S. lawmakers struggled over an agreement to raise the nation’s debt limit.

The Micex Index fell 0.2 percent to 1,510.20, by the close in Moscow. The dollar-denominated RTS sank 0.2 percent to 1,473.97, after rising 20 percent from this year’s low to enter a bull market on Oct. 10. OAO Magnit, the nation’s largest food retailer, traded down 2.2 percent at 8,360 rubles. OAO Lukoil, Russia’s second-biggest oil producer, declined 0.9 percent.

With the U.S.’s borrowing authority set to lapse Oct. 17, Senate leaders in Washington are seeking a pact to avert a default and re-open the government. Bank Rossii kept the one-week auction rate, its benchmark introduced last month, at 5.5 percent at a meeting in Moscow today, the regulator said on its website. That matched the forecast of all 23 economists in a Bloomberg survey.

“Russia’s central bank has acted quite conservatively even in better times,” Sergey Kucherenko, who manages about $50 million in Russian equities at OAO Nomos Bank in Moscow, said by phone. “The state of the American and our economy are cause for concern.”

Above-target inflation has prevented Russia’s central bank from countering a slowdown in economic growth to the weakest pace since a 2009 contraction. Price growth slowed to 6 percent, the top end of this year’s target range, as of Oct. 7, the regulator said today. U.S. Senate Majority Leader Harry Reid was negotiating with Minority Leader Mitch McConnell after talks between President Barack Obama and House Speaker John Boehner broke down.

Alrosa Price

Crude, Russia’s main export earner, fell 0.5 percent to $101.53 in New York. Russia receives about half of its revenue from the oil and natural gas industries.

OAO Alrosa jumped as much as 2 percent and closed up 0.2 percent at 34.88 rubles. The world’s largest diamond producer announced the price range for a planned share sale at 35 rubles to 38 rubles apiece, with the final figure to be announced on Oct. 28, according to a statement.

Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg, with shares on the index trading at 4.4 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index. Ten-day price swings on the Micex rose to 14.397 from 14.179 on Oct. 11.

The Bloomberg-Russia-US gauge lost 0.1 percent to 101.20 today. The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund that holds Russian shares, tumbled 0.8 percent to $29.20.

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