Russian Stocks Approach New All-Time Highs as Oil Surges

Russia’s benchmark index approached new all-time highs today, amid a sharp rally in oil prices and investors’ continued interest in emerging market equities.

From Bloomberg:

The Micex Index rose 0.5 percent, heading for a fresh record high after piercing the 2,000-point level for the first time on Friday. The Russian currency added 0.6 percent to 64.7225 per dollar by 11:16 a.m. in Moscow, its second day of gains, and five-year ruble yields fell for the fifth day, set for the longest winning streak since May. Oil, Russia’s key export earner, rose 2.9 percent to $48.17 a barrel.

Earlier today, Russia and Saudi Arabia announced a new pact to monitor and control the struggling oil market. That news, in turn, spiked oil prices and helped Russian stocks rally.

Russia’s economy is heavily dependent on oil and other natural resources. Its oil and gas sector accounted for 16% of the country’s GDP, about half of its annual tax revenues, and over 70% of total exports.

Also helping Russian stocks today was news from Friday in the U.S., where a weak payrolls report put a damper on hopes for an interest rate hike this month.

U.S. payrolls data on Friday missed expectations, fueling bets the Federal Reserve will keep interest rates lower for longer and fanning the global hunt for returns in riskier developing nations. Brent climbed as Saudi Arabia prepared to make a “significant” announcement following discussions with Russia over promoting market stability.

With rate hike fears dissipating, investors once again turn to higher-risk assets in an attempt to produce better returns and yield.

RSX-2016-09-05

The VanEck Vectors Russia ETF (NYSE:RSX) was inactive today due to the Labor Day holiday in the United States. The largest ETF focusing on Russian equities, with over $1.7 billion in assets under management, has risen 26.62% year-to-date.

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