* RTS shares up 1.4 pct, MICEX index gains 1.1 pct
* Western sanctions seen less severe than feared
* Rouble adds 0.5 pct vs dollar, 0.8 pct vs euro
(Updates prices, adds temporary suspension of trading)
By Alexander Winning and Lidia Kelly
MOSCOW, July 30 Russian assets rallied on
Wednesday, shrugging off a new round of Western economic
sanctions on Moscow as investors deemed the punitive measures
less severe than feared and analysts said their impact was
already priced in.
The European Union agreed its first broad economic penalties
on Russia over its role in the Ukraine crisis on Tuesday in
measures targeting Russia's energy, banking and defence sectors.
The United States, meanwhile, sanctioned three large
state-owned Russian banks, banning U.S. citizens and companies
from dealing with new debt carrying maturities longer than 90
days, or with new equity.
Investors were relieved that neither the EU nor U.S.
measures extended to existing holdings of debt or equity for the
Russian companies affected and that the EU measures would be
reviewed after three months, according to EU diplomats.
"There is an underlying sense that the West still does not
really want to bite the bullet and roll out a meaningful
sanctions regime," said Timothy Ash, head emerging markets
analyst at Standard Bank in London.
"It has the toolkit to hurt Russia but would rather not for
fear of the collateral damage back to its own business
interests," Ash said in a note.
Russia's main share indexes opened lower before rising more
than 1 percent by late afternoon trading. The rouble
strengthened by around 0.4 percent against the dollar, bouncing
off a three-month low, while there were gains for Russia's
Russian markets have fluctuated wildly this year due to
fierce fighting in former Soviet republic Ukraine and the threat
of economic sanctions from the West over Moscow's perceived
backing for pro-Russian rebels fighting forces loyal to Kiev.
New sanctions had been widely anticipated ever since Western
countries accused pro-Russian rebels of shooting down a
Malaysian airliner on July 17, killing all 298 aboard.
Erik de Poy, an equities strategist at Gazprombank in
Moscow, said the stock market was relieved the EU's latest
sanctions would be reviewed after three months.
"The market's focusing on that. But volumes are low in the
summer so the move isn't that indicative," he said. "I still
think we're entering a qualitatively different investing
environment in Russia."
Russia's dollar-denominated RTS index was 1.4
percent higher at 1,224.4 points by 1450 GMT and the
rouble-traded MICEX rose 1.1 percent to 1,384.9 points.
The Moscow Exchange temporarily suspended trading on
its main market mid-afternoon without giving a reason.
Russia's second-largest bank VTB, which featured
in the U.S. sanctions alongside its subsidiary Bank of Moscow
and Russian Agricultural Bank, underperformed the
broader market. Its shares fell 1.5 percent on MICEX.
In currency markets, the rouble strengthened by 0.46 percent
against the dollar to 35.63 and by 0.77 percent
against the euro to 47.64.
That left the Russian currency 0.67 percent stronger at
41.02 versus the dollar-euro basket the central bank uses to
guide the rouble's nominal exchange rate.
Among the factors driving the rouble higher, Pavel
Demeshchik, a trader at ING Eurasia, cited short-term buying
from overseas speculators who see the Russian currency as
The yield on Russia's benchmark Eurobond maturing in 2030
fell to 4.56 percent from 4.77 percent on Tuesday
. Moscow's debt insurance costs fell, retracing
some recent gains as analysts said the sanctions were now
largely priced in.
Russia's five-year credit default swaps dropped 4 basis
points from Tuesday's close to 227 bps, according to Markit.
For rouble poll data see
For Russian equities guide see
For Russian treasury bonds see
Russia in graphics: link.reuters.com/dun63s
(Additional reporting by Vladimir Abramov; Editing by Elizabeth
Piper, John Stonestreet and Susan Fenton)