Russian stocks drop on US senator's sanctions call

Vladimir Zakharov | Flickr | Getty Images

Moscow banking shares declined on Wednesday, with analysts saying the financial sector's losses were being driven by a U.S. senator's call for sanctions on Russian lenders.

Sen. Richard Blumenthal urged President Barack Obama on Tuesday to introduce sanctions against Russian banks, saying at a meeting on U.S.policy toward Syria and Iran that they were helping to finance the Syrian government's war against rebel groups.

Blumenthal, a Connecticut Democrat,named Russia's second-largest lender VTB, the state development bank Vnescheconombank,or VEB, and Gazprombank as those who conduct business in Syria.

VTB shares, the only of the three trading on the stock exchange, were down 0.8 percent, but the shares of its peer and Russia's largest lender Sberbank were also down, trading 0.4 percent lower,both underperforming the broad index.

"Such sanctions are unlikely tobe supported by President Barack Obama, but investors' play to push those shares down can have anegative impact on the overall trading on the Russian stock market," saidAlexandr Kostyukov, an analysts at Veles Capital investment house in Moscow.

Both the dollar-traded RTS index and the rouble-denominated MICEX were down 0.3 percent, at 1,435.1 points and 1,468.9 points, respectively.

This compares to a 0.2 percentdecline in the broad emerging markets index. The Russian rouble weakened slightly against the dollar, trading 0.1 down at 32.24 reflecting a weakening in oil prices.

Brent crude for November deliveryslipped below $108 per barrel on Libya output rise. The rouble weakened 0.3 percent versus the euro to 43.14 and it was down 0.2 percent against the dollar-euro basket at 37.15.

The market will be all about the Fed meeting today," analysts at VTB Capital said in a note, referring to the two-day FederalOpen Market Committee meetings that ends today.

"Quantitative easing tapering is fully priced in and is a consensus, so its magnitude and strengthening in the forward guidance is goingto be on the radars today."

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