News / Economy

Russian Markets Feel Heat from Ukraine Crisis

Armed pro-Russian separatists stand guard at a crash site of Malaysia Airlines Flight MH17, near the village of Hrabove, Donetsk region, July 20, 2014.
Armed pro-Russian separatists stand guard at a crash site of Malaysia Airlines Flight MH17, near the village of Hrabove, Donetsk region, July 20, 2014.

Russian shares slid on Monday to a two-month low as Moscow came under fierce international pressure over the downing of Malaysia Airlines flight MH17 and European governments threatened to follow the United States in widening economic sanctions.

Monday's losses extended a near 8 percent slump last week provoked by Washington's imposition of sanctions on large Russian domestic companies, including oil major Rosneft which again fell sharply on Monday.

“There's no doubt that investors are uneasy - there are a lot of questions out there,” said Gazprombank strategist Erik DePoy. “It is an emotional time... the [airliner crash] has exacerbated tensions already there.”

Russian stocks are this year's worst performers among emerging markets, losing 12 percent in dollar terms compared with a 6 percent gain on the benchmark MSCI index as a whole.

At 1150 GMT, the dollar-denominated RTS index had fallen 2.15 percent to 1,249.9 points - down 9 percent since the beginning of last week.

The rouble-traded MICEX hit its lowest point since mid-May. It traded 2.1 percent lower at 1,393.3 points - down 7 percent since the start of last week.

The United States has presented what it says is overwhelming evidence of Russian complicity in the shooting down of the jet over eastern Ukraine last Thursday, and demanded President Vladimir Putin use his influence over pro-Moscow rebels who control the crash sites to allow international investigators free access.

Putin has blamed the Ukrainian military for the disaster, in which 298 people died, and said on Monday that everything must be done to guarantee the security of the international experts at the site.

Britain, Germany and France agreed at the weekend that they should be ready to ratchet up sanctions when European foreign ministers meet in Brussels on Tuesday.

Milder Falls

DePoy said the sell-off was an “across the board lightening of positions” but noted that the market had not fallen to the same degree as when the crisis first erupted with the fall of a pro-Russian president in Ukraine and Moscow's annexation of Crimea in March.

Companies targeted by last week's U.S. sanctions continued to fall. Rosneft was down nearly 2 percent in morning trading, bringing its fall since the beginning of last week to 7 percent. Gas producer Novatek, which was also slapped with U.S. sanctions, was down 1 percent, bringing its fall since the beginning of last week to nearly 8 percent.

The overall falls were bigger than those on overseas markets, where London's FTSE fell 0.2 percent on the day and the pan-European FTSEurofirst 300 fell 0.5 percent.

While hitting individual companies, the U.S. sanctions also make it more difficult for Russian companies to refinance existing international loans and has dashed hopes that the country's syndicated loan market is reopening.

The financial subindex on MICEX, a market capitalisation-weighted price index of Russia's top-tier and most liquid financial stocks, underperformed, traded 2.1 percent down on the day and losing nearly 9 percent since early last week.

Sberbank, Russia's largest lender was down nearly 3 percent and VTB, the second biggest, is also being hit. “Though not on the sanctions list, Sberbank and VTB shares will likely remain under pressure, along with the sector as a whole,” analysts at Morgan Stanley wrote in a note.

“The risk of a longer-term wider credit crunch increases as funding is limited, the cost is higher and therefore credit growth likely lower.”

The U.S. sanctions also increased the cost of insuring Russian debt against default - up eight basis points on Monday in the five-year credit default swaps market to 216 bps, according to Markit data.

This means it costs $216,000 annually to insure exposure to $10 million worth of Russian debt over a five-year period.

“We continue... to see further escalation of sanctions as probable, with the US continuing to set the pace; but it will likely be a protracted process,” said analysts at Deutsche Bank in a research note. “Despite the selloff, however, Russian asset prices are still well above the lows reached in mid-March.”

The rouble was slightly stronger against the dollar and the euro at 35.13 and 47.52, respectively, after losing nearly 3 percent last week. End-of-month taxes that force exporters to convert their foreign currency revenues into roubles aided the local currency.

The rouble was unchanged at 40.72 against the dollar-euro basket the central bank uses to gage the rouble's nominal exchange rate, but analysts say the worst is not yet over for the currency.

“There is a bit of stability [in currency and bond prices] after significant selling pressure last week,” said Sebastien Barbe, head of EM FX strategy at Credit Agricole in Paris, who said that talk the central bank may raise interest rates this week was supporting the currency.

“If you want to participate in this market you have to be a risk taker,” Barbe said. “It's hard to recommend long positions on rouble assets at the moment because its not economic risk or financial risk but political risk which is very hard to assess.”

You May Like

Video In US, Columbus Day Still Generates Controversy

Holiday marks date Columbus discovered Americas, but some are offended by legacy because he enslaved many natives he encountered More

Video Through Sports, Austria Tries to Give Migrants Traction

With 85,000 people expected to claim asylum in Austria this year, its government has made integration through joint physical activities a key objective More

Video Kickboxing Champion Shares Sport With Young Migrants

Pouring into Europe by hundreds of thousands, some migrants, especially youngsters, are finding sports a way to integrate into new host countries More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs

World Currencies


Rates may not be current.