By Toni Vorobyova and Michael Stott
MOSCOW (Reuters) - Buyers flocked back to Russia's batteredstock markets on Friday, sending prices soaring as tradingresumed after a two-day halt and a $130 billion emergency statesupport package helped restore confidence.
The MICEX and RTS bourses were twice forced to call briefsuspensions of trading as sharp gains exceeded technicallimits. By 12:15 British time, the MICEX index was up 25percent and the RTS index was up 20 percent.
Some banks and energy firms soared as much as 60 percentafter authorities said they could spend up to $20 billion (11.1billion pounds) on buying stocks of gas monopoly Gazprom, oilmajor Rosneft and bank VTB to support the market and resellthem at a profit in the future.
But ratings agency Standard and Poor's, which repeatedlycriticised Russia for plans to spend windfall oil revenues onsupporting financial markets, said it had revised the country'soutlook to stable from positive.
"The outlook revision is based on growing uncertaintyregarding Russia's economic policy response as the liquiditycrisis in its financial markets has deepened," the agency said,adding that the economy may struggle amid a virtual closure ofinternational capital markets.
Prime Minister Vladimir Putin told a major investment forumhe would respond to the financial crisis with market measures.Russia had enough foreign exchange and gold reserves to protectits financial system and guarantee the rouble, he added.
Putin sharply criticised what he described as other states'attempts to drag Russia back to the Cold War -- an apparentreference to a heavily critical speech made by U.S. Secretaryof State Condoleezza Rice in Washington on Thursday.
"We view all attempts to drag us back into the Cold War eraas nothing less than a direct threat to Russia's modernisationproject," Putin said.
Relations between Russia and the West soured last monthafter Moscow sent tanks to repel an attack by U.S. ally Georgiaon its breakaway region of South Ossetia.
The crisis in diplomatic relations with the West coupledwith a decline in oil prices and the global financial turmoilhave more than halved the value of Russian stocks since theyreached a peak in May.
TEXT TO BUY
Top government officials and businessmen at the forum inthe Black Sea resort of Sochi cheered the news from Moscowmarkets.
"We ask you not to leave the hall to make (stock purchase)orders. You can send them by SMS -- the house rules of thisforum permit that," Troika Dialog brokerage managing directorAndrei Sharonov said.
Traders said the government's pledge on Thursday to spend$20 billion on share purchases, cut oil sector duties by $5.5billion, lend money to brokers and inject huge sums of cashinto the banking system appeared to be working.
The Russian market surge came as global stock marketsrecovered strongly in response to widespread moves to tacklethe financial markets crisis.
"We are gapping higher thanks to the recovery in worldstock markets, the liquidity injection into our system and thetax cuts," said Alexander Razuvaev, head of market analysis atSobin Bank.
"I think we will have a jump higher and then aconsolidation around the 1,300-500 level (on RTS) as long asthere is no crash in the United States."
As stocks recovered, the markets watchdog said it wouldstudy on Friday whether to lift a ban on some operations, whichit previously blamed for the market slump. Those includedmargin trading, when investors borrow money from the broker,and short selling, or bets on a fall in an asset's price.
Despite its strong economic fundamentals, Russia has beenamong the emerging markets hardest hit by the fallout from theglobal financial crisis.
Analysts estimate investors have pulled about $36 billionfrom Russia since early August.
Foreign fund investors, though attracted by Russia'sfast-growing economy and its huge reserves, remain nervousabout the country's poor image in the West.
"Some people back home think this place is one notch aboveNorth Korea," said one U.S. fund manager visiting Moscow. "It'stough to bet against that."
But confidence seemed to be gradually returning across theboard with money market rates falling further to 7.5-8.0percent from the weekly record of 10.5 percent and demand atthe central bank's repo auction below peak levels.
Yields on Russia's benchmark 2030 Eurobond also improvedfrom their highest levels in three and a half years, falling by276 basis points on Friday. The rouble was stable at 30.35versus the euro-dollar basket.
(Additional reporting by Olga Popova, Simon Shuster andDmitry Zhdannikov in Moscow and Oleg Shchedrov and Melissa Akinin Sochi; Editing by David Cowell)
