LONDON — Russian stocks advanced on Wednesday, recovering from early losses in volatile trade, while the rouble was stable amid a flurry of Western diplomacy and investigations into a missile hit that killed two people in Poland on Tuesday.
Russia’s stock markets were down as much as 1.3% in the first minutes of trading but had reversed losses to stand higher on the day by early afternoon in Moscow. By 1018 GMT, the dollar-denominated RTS index was up 0.4% at 1,163.9 points. The rouble-based MOEX Russian index was 0.3% stronger at 2,230.1 points.
Russian blue-chip stocks had sold off by up to 4% on Tuesday evening when reports of the missile hit first emerged, before staging a partial recovery.
The rouble steadied in early trading. It was flat against the U.S. dollar at 60.39 and also unchanged against the euro at 62.80.
Analysts said traders were likely to remain cautious on Wednesday, as NATO was due to hold an emergency meeting over the incident in Poland.
The West was scrambling overnight to investigate the strike in the village of Przewodow, near Poland’s border with Ukraine.
U.S. President Joe Biden said early information suggested it may not have been caused by a missile fired from Russia. Ukraine and Polish authorities said the explosion, which killed two people, had been caused by a Russian-made missile.
Some market analysts said the early morning sell-off in Russian stocks – modest for a market which is prone to bouts of sharp volatility – had presented a buying opportunity.
“Investors regarded the incident in Poland as an opportunity to buy on a drawdown,” said Yaroslav Kabakov, strategy director at the Moscow-based Finam brokerage.
“If the situation does not develop into escalation with Western countries, Russian indexes will be able to increase.”
Strict sanctions on Russia’s financial system, as well as counter-sanctions from Moscow, have largely locked Western investors out from Russian financial markets, with domestic traders responsible for the bulk of trading and market moves.
The Russian currency, which is under strict capital controls, appeared to be unfazed, despite the geopolitical headwinds. It is being supported by a month-end tax period in which companies convert foreign currency earnings into roubles to cover domestic liabilities, and analysts say it could still advance to 60 per dollar in the coming days.
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For Russian treasury bonds see (Reporting by Jake Cordell; Editing by Bradley Perrett, Kirsten Donovan)