Russia Stocks Drop After Biggest Gain in Month as Rosneft Falls

Russian stocks fell after gaining the most in a month yesterday as OAO Rosneft, the nation’s biggest oil producer, declined and brent oil retreated.

The Micex Index dropped 0.4 percent to 1,480.73 by the close in Moscow, extending its loss this year to 1.6 percent. The benchmark gauge climbed 1.2 percent yesterday, the biggest advance since Dec. 16. Rosneft, which has a 4.6 percent weighting on the Micex, slid 1.1 percent to 243.50 rubles. OAO Magnit, the nation’s biggest retailer, jumped 2.4 percent to 9,035 rubles.

Rosneft received about $20 billion as part of a $70 billion prepayment deal to supply crude to China National Petroleum Corp., according to two people with knowledge of the matter who asked not to be identified because the amount hasn’t been disclosed. That triggered a concern the company may mismanage the redeployment of funds. Brent crude retreated 0.2 percent to $106.95, after rising 0.7 percent yesterday. Russia receives about half of its budget revenue from oil and natural gas sales.

“Rosneft is the key mover today,” Luis Saenz, the head of equity sales and trading at BCS Financial Group in London, said by e-mail. “Investors are rightly concerned with Rosneft’s strategic discipline. Both on the M&A and on the capital expenditure fronts.”

Rosneft said on its website yesterday it got the first tranche of prepayments from CNPC. OAO Surgutneftegas oil producer fell 1.4 percent to 27.671 rubles.

Magnit Jumps

Magnit, last year’s best Micex performer with a 91 percent gain, dropped the most since October 2011 on Jan. 10 after the company said full-year retail sales growth slowed to 23 percent in December from 29 percent a month earlier.

The stock “had been oversold on the slowdown concerns but it remains a favorite,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group Inc. in Moscow, said by phone.

Magnit increased 0.3 percent to $61.65 by 3:06 p.m. in London. Rosneft retreated 1.3 percent to $7.205.

Fewer Americans filed applications for unemployment benefits last week, a sign the labor market continues to strengthen, data showed today. Jobless claims decreased by 2,000 to 326,000, the least since the end of November, from a revised 328,000 in the prior period, a Labor Department report showed today.

The U.S. Federal Reserve, which next meets Jan. 28-29, decided at its December meeting to start reducing the pace of monthly bond purchases by $10 billion to $75 billion.

RTS Declines

“The mood in the market is quite cautious because investors are unsure exactly how active the U.S. stimulus tapering will be,” Selyandin said. “People are ready for a correction.”

The dollar-denominated RTS Index fell 0.3 percent to 1,397.23, extending this year’s retreat to 3.2 percent.

Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg, with shares on the benchmark Micex trading at 4.3 times projected 12-month earnings, compared with a multiple of 10 for the MSCI Emerging Markets Index.

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