As Russia's business and political elite wound up their weekend gathering in St. Petersburg, the local markets received a short-term lift, but wider concerns over global inflation lingered through the week.

Russian bourses shrugged off global worries Monday, with investors chewing on the prospect of Svyazinvest's privatization and positive noises from the government on the protection of property rights and an improved legal system.

Regional telecoms, the chief beneficiaries of a Svyazinvest privatization, soared Monday, after Svyazinvest chief Alexander Kiselyov said the holding should be privatized over the next year.

Sibirtelecom rose 7.6 percent Monday, while Volga Telecom ticked up 6.4 percent and Uralsvyazinform increased by 5.3 percent.

But the "decoupling," short-lived as it was, was chiefly down to the St. Petersburg forum news flow, analysts said.

Commodity prices and inflationary concerns swung back up to the top of investors' minds, as the International Energy Agency forecast a slowdown in demand for oil for 2008. That, combined with a strengthening in the dollar, pushed oil down. On Friday, crude oil for July delivery closed at $134.86 per barrel in New York, 2.7 percent down on the week. Gold futures for August closed Friday at $873.10 in New York, down 2.9 percent on the week.

The dollar had its strongest week against the euro since 2005, climbing 2.6 percent as traders speculated that the U.S. Federal Reserve would raise borrowing costs this year.

Signs of further interest rate hikes in Europe to combat inflation, combined with the hawkish language from Federal Reserve chief Bernard Bernanke, indicate a coordinated campaign to tackle inflation rather than prop up growth, Alfa Bank strategist Erik DePoy said.

"Rising interest rates are never good for equities," DePoy said. "It's just a matter of time before we could see some serious selling. This correction [we've been expecting] hasn't really happened."

Oil stocks led the decline in Russia on Tuesday, with Rosneft dropping 1.3 percent on MICEX.

Steel companies also fell, with foreign-listed shares of Evraz ending the week down 3.3 percent in London, and Mechel down by 7 percent in New York amid jitters over possible higher taxation in the steel sector.

A Tuesday meeting between Industry and Trade Minister Viktor Khristenko and representatives from the steel industry on the issue of taxation reached no conclusion, giving some relief to steel stocks on Russian markets Wednesday, with NLMK leading the way.

Both markets closed up on the short three-day week on light trading ahead of the Russia Day holiday, with the RTS nudging up 0.6 percent to 2,356.71 points, while the MICEX was up 0.8 percent to 1,826.67 points.

But the markets remain volatile in the present macroeconomic environment, some analysts warned.

"My instinct says, be very cautious in the current market," DePoy said.