Russian Stocks Fall, Ruble Weakens on Crude, Korea ‘Aggravation’

Russian stocks dropped the most in a week and the ruble weakened against the dollar after oil slid and North and South Korea exchanged artillery fire, curbing investor appetite for riskier assets.

OAO Magnitogorsk Iron & Steel lost 2.8 percent and oil producer OAO Rosneft fell 1.3 percent. VTB Group, the country’s second-biggest lender, declined 2.3 percent, helping push the Micex Index down 0.9 percent to 1,536.87 by the 6:45 p.m. close in Moscow, its biggest decline since Nov. 16. Russia’s currency slumped for the second time in three days, depreciating 0.7 percent to 31.30 per dollar, its weakest since Nov. 17.

Oil, Russia’s main export earner, fell as much as $1.46, or 1.8 percent, to $80.28 a barrel in New York. North Korea fired “several” artillery shells into South Korea near the two nations’ western border, prompting a return of fire, the South’s Joint Chiefs of Staff said in a statement. The confrontation added to earlier losses in Asian equities after Moody’s Investors Services warned of a downgrade of Ireland and amid concern that China may intensify effort to contain inflation.

“Markets don’t like uncertainty and there could be a big uncertainty if the aggravation in Korea develops,” John Heisel, a sales trader at Citigroup Inc. in Moscow, said by phone. “The Irish bailout and China’s moves on inflation also don’t encourage investors to take risk in emerging markets.”

Copper on the London Metal Exchange dropped 1.5 percent to $8,168 a metric ton. Zinc, lead, aluminum and tin also dropped. OAO GMK Norilsk Nickel, Russia’s largest miner, slipped 1 percent to 5,863.85 rubles.

Won’t Last Long

Bank Rossii Chairman Sergey Ignatiev said today the weakening of the ruble versus a target dollar-euro basket won’t last long. The ruble was little changed at 36.2058 versus the basket, the rate of which is calculated by multiplying the dollar-ruble rate by 0.55, the euro-ruble rate by 0.45, and adding them together.

Russia’s central bank has shifted the range it allows the ruble to trade within against the target dollar-euro basket five times since the middle of October, according to Nordea Bank AB.

The currency’s 2 percent slide against the basket since Oct. 13, when Bank Rossii first announced it had expanded the trading range, has meant policy makers have had to sell foreign currency to arrest the drop. Sales of dollars and euros breached the bank’s $650 million limit once in October and as much as four times in November, forcing the corridor to shift by 5 kopeks each time, Aurelija Augulyte, Nordea’s Russia economist, wrote in a research report e-mailed yesterday.

Against the euro, the ruble strengthened 0.5 percent to 42.2095.