Russian shares near 1-year low on US sanctions risk, oil, rouble

LONDON: Russian stocks slipped close to one-year lows on Wednesday, facing the prospect of a fresh round of US sanctions and lower oil prices while Chinese stocks also fell after lacklustre investment data that hinted at slower economic growth.

Broader emerging stocks and currencies inched up however before a US Federal Reserve meeting that is expected to deliver a rate rise. But unless accompanied by unexpectedly hawkish language, emerging markets are unlikely to be impacted.

MSCI's emerging equity index has failed to make much headway after hitting successive two-year highs and China's tepid investment data, reinforcing the picture of slower growth, could ensure markets continue to move sideways.

The benchmark rose 0.2 percent, up for the second straight day after Monday's tech-driven selloff, for year-to-date gains of over 17 percent

"Emerging markets have plateaued a bit as people want to see what the Fed does and if it downgrades inflation expectations the dollar will sell off and that's good news for EM," said Peter Kinsella, head of FX and rates strategy at Commonwealth Bank of Australia.

"Commodity prices too are way below the levels we saw before so some good news on commodities will be well-received."

Shanghai and Shenzen-listed shares fell 0.7 percent and 1.3 percent respectively after the data while shares in companies partly owned by Anbang Insurance Group tumbled after its head resigned.

Russian shares lost 0.6 percent and Moscow is this year's worst performing emerging equity market in dollar terms. A fresh headwind is US legislation that could impose new sanctions on Russia and prevents the White House from easing or ending sanctions without congressional approval.

Russian assets have also been hurt by oil's 10 percent decline since late-May and a hawkish central bank stance that has allowed the rouble to shrug off crude price weakness. The rouble was flat on the day despite a one percent fall in Brent futures

"The latest oil price action is ominous for Russian equities and the rouble's de-coupling from oil compounds the blow for Russian oil stocks," Christopher Granville at TS Lombard wrote, predicting the pace of Russian rate cuts to slow to 25 bps.

Rouble strength means investors should be overweight on retail-oriented domestic stocks while selling export-oriented ones, especially those in oil and gas, he advised clients in a note.

Qatari stocks meanwhile bounced almost 1 percent to a three-day high while the riyal also firmed slightly in forward markets against the dollar, off record lows.

In central Europe, Hungarian stocks jumped 1 percent to new record highs, lifted by pharma blue-chip Gideon Richter and OTP Bank which gained 1.7 percent and 1.2 percent respectively.