Ksenia Galouchko

Russian equities retreated for the first time in four days as crude oil, the nation’s chief export earner, fell and investors sold riskier assets amid a deadlock in U.S. budget talks.

The Micex Index lost 0.2 percent to 1,419.01 by 1:55 p.m. in Moscow. Utilities and financial company stocks declined at least 0.4 percent on average. Russia’s dollar-denominated RTS Index (RTSI$) sank 0.3 percent to 1,447.41. Federal Grid Co. dropped 0.8 percent, while VTB Group, Russia’s second-biggest lender, declined 0.5 percent.

Oil slid as much as 0.6 percent before trading at $89.12 a barrel in New York after a report showed U.S. manufacturing unexpectedly shrank. Russia receives about half of its budget revenue from the oil and natural gas industry. House Republicans rejected U.S. President Barack Obama’s demand for higher tax rates, heightening the confrontational tone of budget negotiations.

“The fiscal cliff remains a key question, we’re not seeing more clarity, investors continue to take profits today,” Mark Rubinstein, head of research at IFC Metropol, said by phone from Moscow. “Oil is being weighed down by the budget negotiations.”

Abramovich Stake

Standard & Poor’s GSCI Index of Commodities lost 0.2 percent to 649.49. Zinc, tin and nickel declined in London.

OAO GMK Norilsk Nickel gained as much as 1.6 percent before trading up 1.5 percent at 4,885 rubles, the highest since Nov. 6 on a closing basis. Russian billionaire Roman Abramovich agreed to buy a 7.3 percent stake in the miner as its two biggest owners seek an end to a four-year feud over control of the company. Rusal headed for the biggest advance since Oct. 24, increasing 1.9 percent to 185.97 rubles.

Abramovich’s Millhouse LLC investment company will acquire the stake in Moscow-based Norilsk as part of a settlement between its shareholders United Co. Rusal and billionaire Vladimir Potanin, Hong Kong-listed Rusal said today in a statement. The purchase price wasn’t disclosed.

“The main thing is the resolution of the shareholder conflict,” Rubinstein said. “The market will be expecting higher dividends from Norilsk now.”

The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, was steady at $27.84 yesterday. The RTS Volatility Index, which measures expected swings in futures, increased 0.8 percent to 22.69 points.

Dixy Rallies

OAO Dixy Group, which operates more than 1,000 neighborhood stores in Russia, rallied 3.8 percent to 356.02 rubles, heading for the biggest gain since Oct. 22. The amount of shares traded was 13,460, equivalent to 82 percent of the three-month average.

The company climbed as JPMorgan Chase & Co. lifted the stock to overweight from underweight, Bank of America Corp. raised it to buy from neutral and Alfa Bank increased its price estimate to 530 rubles, citing the outlook for next year.

The retailer’s third-quarter net income jumped 18 percent to 280 million rubles, the company said in a statement yesterday. Revenue in the period rose 23 percent to 35.9 billion rubles.

Russian equities have the lowest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

The Micex trades at 5.3 times estimated earnings after adding 1.3 percent this year. That compares with a multiple of 10.4 times for the MSCI Emerging Markets Index, which has added 9.9 percent.

Goldman Sachs Group Inc. (GS) was approached by President Vladimir Putin’s government to help improve the nation’s image and lure investment, First Deputy Prime Minister Igor Shuvalov said in an interview in New York yesterday.

New York-based Goldman Sachs invested more than $1 billion of its own money to buy stakes in Russian companies including Mail.ru Group Ltd. and Tinkoff Credit Systems in recent years, arranging bond and equity offerings.

http://www.bloomberg.com/news/2012-12-04/russia-stocks-drop-first-day-in-4-as-u-s-budget-sends-oil-lower.html