Russian stock indexes returned to gains after a short-lived slide in early trade on Wednesday, shrugging off threats of new western sanctions in response to what Moscow calls "a special military operation" in Ukraine, while the rouble stabilised.
Equities largely lost ground at the opening on reports that the United States and its allies had prepared new sanctions on Moscow that will target Russian banks and officials and ban new investment in Russia.
An EU official said the European Union will also have to introduce measures against imports of Russian oil and even gas at some point as a way to pressure Moscow.
The dollar-denominated RTS index fell to 979.34 points before paring losses and adding 0.4 per cent on the day to 1,008.9 points by 0749 GMT.
Its rouble-based MOEX Russian index also gained 0.4 per cent to 2,674.1, still trading far away from an all-time high of 4,292.68 it reached in October.
The Russian stock market is driven by negative sentiment caused by news on new western sanctions, Sinara investment bank said in a note.
But the downside for the Russian market could be limited as the government has promised to support Russian companies by buying their stocks with money channelled from the rainy-day National Wealth Fund.
Shares in Russia's oil producer Lukoil climbed 3.5 per cent higher, outperforming the broader market. Its peer Gazprom Neft added 2.5 per cent.
Banks were in the red, with the two major state-owned lender Sberbank and VTB loosing 2.2 per cent and 3.4 per cent, respectively.
The Russian rouble was little changed on the day at 83.42 to the dollar and gained 1.1 per cent to trade at 90.52 versus the euro, near the levels seen before Russia sent tens of thousands of troops to Ukraine on February 24.
Weekly inflation data will be in focus later in the day. If inflation shows signs of slowing, it may raise chances of a rate cut by the central bank at its next board meeting in late April. The latter could be positive for OFZ treasury bonds.
"At the same time, geopolitical risks and rouble volatility limit the probability of this scenario," Promsvyazbank said in a note.
