Russian Equities Drop Overseas as Oil, Ruble Continue Retreatby
Energy-heavy Market Vectors ETF retreats for a third day
European Union extended sanctions againt Russia to July 31
The largest exchange-traded fund tracking Russian stocks fell for a third day as the lowest oil price in 11 years and the weakest ruble on record dimmed the prospects for a recovery in the world’s biggest energy exporter’s economy.
The Market Vectors Russia ETF slid 0.1 percent to $14.49 in New York, narrowing its advance in 2015 to 2.6 percent. The dollar-denominated RTS Index declined 0.9 percent to 758.97 in Moscow, while a gauge of Russian stocks traded in London retreated 1.3 percent.
Stocks slumped as crude, the country’s main export, slid to the lowest level since 2004 on signs the global glut will persist. The ruble, the world’s best-performing currency earlier this year, has weakened 6.7 percent this month, the second-biggest retreat among developing-nation currencies. Investor sentiment soured further as the European Union renewed sanctions until July 31. The financing restrictions and other measures linked to the Ukraine conflict, along with plunging crude prices, have pushed Russia into a recession forecast to persist through the second quarter of 2016.
“Investors are watching oil go from bad to worse, and some of them don’t want to bear the risk of keeping Russian assets over Christmas , so they are using the last days when trading volume is relatively high to sell,” Andrey Shenk, an analyst at Alfa Capital in Moscow, said by phone on Monday. “With the end of the slump in oil nowhere in sight, investors sentiment on Russia is bearish.”
Russia’s economy will probably shrink 3.8 percent in 2015 and not resume growth until the third quarter of 2016, according to the median of 39 economists surveyed by Bloomberg. Sanctions, which EU leaders unanimously agreed should remain in place as long as Russia fails to honor a cease-fire deal reached in February, will now expire on July 31 unless they are renewed again. They had been scheduled to lapse Jan. 31. The U.S. and others also have imposed measures to punish Russia for supporting a rebellion in Ukraine.
Brent crude, the grade traders use to price the nation’s main export blend, slumped 1.4 percent to $36.35 a barrel. The ruble slid 0.4 percent to 71.233 Futures contracts on the RTS Index expiring in March rose 0.2 percent to 75,480 in U.S. hours.
Moscow-based United Co. Rusal fell 0.4 percent to HK$2.34 at 11:03 a.m. in Hong Kong, heading for the lowest close since March 14, 2014.