Russia Stocks Drop After Rally as Sanctions Threat Offsets Truce

Russian stocks fell after jumping the most since March yesterday as investors weighed whether President Vladimir Putin’s peace plan for Ukraine would go far enough to avert new sanctions.

The benchmark Micex Index declined 0.4 percent to 1,442.89 by 1:41 p.m. in Moscow. The measure rallied 3.5 percent yesterday, the biggest advance since March 18, as Putin agreed with Ukrainian President Petro Poroshenko on steps toward a cease-fire in his neighbor’s eastern region. OAO Sberbank, the nation’s biggest lender, dropped 1.3 percent today following’s yesterday’s 6.4 percent surge.

Currencies and stocks across emerging markets climbed as Putin’s seven-point plan to achieving peace boosted optimism that fighting will end between pro-Russian rebels and government forces in Kiev. The European Commission will continue preparations for the next round of Russia sanctions, spokeswoman Maja Kocijancic said yesterday. U.K. Prime Minister David Cameron threatened tougher penalties if the crisis worsens.

“The market reacted very enthusiastically to yesterday’s news and now investors are considering what the peace plan actually means,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone. “The fact that talks are happening is positive, but for further growth, we need to see what concrete steps will be taken to stop the violence.”

Russia’s U.S.-traded Exchange Traded Funds had $9.07 million inflows yesterday, equivalent to about 0.4 percent of the market capitalization, data compiled by Bloomberg show.

The nation’s assets have been battered since the U.S. and European Union imposed the last round of sanctions on some companies and banks in July. Putin retaliated last month with a food-import ban, stoking bets the crisis will worsen and exacerbate an economic downturn that threatens Russia with its first recession since 2009.

The Micex trades at 5.1 times estimated earnings, the cheapest valuation among emerging markets tracked by Bloomberg. That compares with 5.2 times at the end of February before Russia’s incursion into Crimea.

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