Russia Stocks Advance to Two-Week High on Yellen Speech, Crude

Russian stocks climbed, sending the benchmark index to a two-week high, as Federal Reserve Chairman Janet Yellen said more work is needed to restore the labor market to health and oil advanced.

The Micex Index increased 0.5 percent to 1,483.57 by the close in Moscow, the highest since Jan. 24. Crude producers OAO Tatneft and OAO Lukoil rose at least 1.5 percent. OAO Novatek, the nation’s second-biggest natural-gas producer, added 1.4 percent to 409.61 rubles.

Yellen, delivering her first public remarks as Fed chairman, pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps.” The ruble weakened for a third day against the central bank’s dollar-euro basket, boosting the profit outlook for energy exporters with costs in rubles and revenue in foreign currency.

“For emerging markets, the biggest threat is a rapid rise in U.S. Treasury yields,” Slava Smolyaninov, the chief strategist at UralSib Capital LLC in Moscow, said by e-mail. “As long as the increase is gradual, we should be okay. Oil is very resilient and investors are pricing in the weaker ruble with most benefits falling on the exporters’ side.”

Oil, Russia’s chief export earner, gained as much as 0.5 percent to $108.88 a barrel in London. The ruble declined 0.2 percent to 40.5233 against the Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow.

While the Fed pressed ahead with stimulus cuts in January, policy makers have also sought to reassure investors they intend to hold the Fed’s target rate near a record low.

The Micex Index advanced an average 77 percent during the Fed’s first two rounds of debt purchases, and fell 0.6 percent in periods of no stimulus, the biggest difference of 46 emerging and developed markets tracked by Bloomberg.

Cheapest Valuations

The dollar-denominated RTS Index gained 0.4 percent to 1,341.85. Russian equities have the cheapest valuations among 21 developing-nation economies monitored by Bloomberg. Shares on the Micex trade at 3.1 times projected 12-month earnings, compared with a multiple of 9.2 for the MSCI Emerging Markets Index.

The ruble has slumped 5.6 percent against the dollar in 2014, the second-worst performer among 24 emerging-market currencies tracked by Bloomberg.

Novatek increased 2.5 percent to $129.50 in London. Tatneft rose 2.3 percent to $35.94, while Lukoil advanced 1.9 percent to $58.25.

“A weaker ruble and strong oil give a boost to oil stocks,” Anvar Gilyazitdinov, who manages about $10 million at Rye, Man & Gor Securities in Moscow, said by phone.

That depreciation should help support energy companies in 2014, according to Goldman Sachs Group Inc., which raised its coverage view on the nation’s oil industry to attractive from neutral yesterday. Russia receives about half of its budget revenue from oil and natural gas sales.

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