Russian stocks decrease as oil price falls below $50 per barrel

MOSCOW, Oct 26 (PRIME) -- The Russian stock market went down on Wednesday as the oil price slumped below a psychologically important mark of U.S. $50, but media reports that possible U.S. sanctions may be softer than expected cushioned the decline, analysts said.

The MICEX eased 0.12% to 1,974.81 and the RTS slid 1.27% to 989.52.

“The $50 notch is seen as a threshold, both psychological and technical. Crossing it in any direction means a change in the medium-term prospects for the oil market. Now they risk transformation from positive to negative,” Vitaly Manzhos, a senior analyst at Bank Obrazovanie, said, adding that this was the most worrying sign.

The foreign market background was negative with the Chinese benchmark index CSI300 declining and the European combined index Stoxx 600 falling on the back of Brexit fears, Timur Nigmatullin, an analyst at investment company Finam, said.

But the Russian market decrease was much weaker than expected, Manzhos said.

Earlier on Wednesday, Bloomberg reported that new U.S. sanctions against Russia envisage blacklisting more Russian army commanders and companies which ship weapons for the Syrian operations.

Alexander Razuvayev, analyst at Alpari, said that this threat is laughable. “The West has, in fact, used all possible levers of influence on Russia. The effect has been more than modest. A real industry downturn and budget troubles are to a great extent due to an oil price decrease and an austere monetary policy by the central bank… A compromise is a probable outcome of the geopolitical clash, easing always follows a crisis in relations.”

He said that Russian market bulls will open long positions on the back of this information.

Lukoil was the biggest loser after publishing a weak report under the Russian Accounting Standards for January–September, Manzhos said.

Companies owning oil assets underperformed the market, correcting downwards, he said.

A loss of interest in shares of oil and gas companies resulted in more active purchases of metals producers and electric power companies, Manzhos said.

Federal Grid Company of Unified Energy Systems (FGC UES) and Inter RAO also rose on the back of strong financial results, he said. FGC UES gained 2.48% to 0.1722 rubles, and Inter RAO 1.06% to 3.2845 rubles.

Below are the MICEX’ five most active stocks on Wednesday:

Company	Change, %	Last price, rbl	Trading volume, bln rbl
Sberbank	-0.59	150.67	5.413
Gazprom	+0.01	135.32	1.612
Lukoil	-0.53	3081.5	1.590
Severstal	+3.72	855.7	0.912
Mechel	+2.39	147.42	0.871

(62.0480 rubles – U.S. $1)

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