Earthquake in the Russian market… and global aftershocks
Moscow Stock Exchange loses 10%
Wednesday – 22 Rajab 1443 AH – 23 February 2022 AD Issue No. [
A trader follows stock market indices, New York Stock Exchange (AFP)
Moscow – London: «Middle East»
The Russian stock market fell on Tuesday morning, with indices recording a decline of more than 8 percent at the opening of trading sessions, after Moscow recognized the independence of two Ukrainian separatist regions loyal to it in the midst of a crisis between Russia and the West over Ukraine.
The main index of the Moscow Stock Exchange “RTS”, denominated in dollars, lost 9.9 percent of its value at 0708 GMT. As for the ruble-denominated “Emoex” index, it fell by 8.5 percent. During Monday’s trading, Russian stocks recorded their biggest decline since 2008, and the main MOEX index of Russian stocks fell by about 14 percent, while the RTS dollar-denominated stock index fell by 17 percent, which is the worst performance of any stock exchange in the world. Monday. While the prices of all Russian shares fell, the shares of natural gas giant Gazprom and Sberbank fell by more than 15 percent each.
At the same time, the Russian Finance Ministry canceled an auction scheduled for Tuesday to sell bonds due to “increased financial market volatility,” as the yield on Russian ten-year bonds rose by about 70 basis points, according to Bloomberg News Agency. The Russian ruble fell against the dollar by as much as 3 percent on Monday, the largest decline of the currency against the dollar globally during the day.
“The volatility is high due to the continued prevalence of uncertainty … in the event of an armed conflict the value of Russian assets will fall even more than they are now,” said Christian Maggio, head of portfolio planning at London-based brokerage TD Securities.
Earlier on Monday, EU foreign policy chief Josep Borrell said the bloc would act as a “strong and united front” if Russia recognized the breakaway Ukrainian regions of Donetsk and Luhansk as independent entities. “We call on (Russian President Vladimir Putin) to respect international law and the Minsk agreements, and we expect him not to recognize the independence of the Donetsk and Luhansk regions,” Borrell said at a press conference in Brussels.
“If there is annexation, there will be sanctions,” Borrell said, adding: “I will put the matter on the table and the ministers will have to make their decision.”
Coinciding with the Russian earthquake, the main US stock indexes fell at the opening Tuesday, with increasing fears of war and threats of sanctions, but energy stocks jumped with oil prices rising to their highest levels since 2014.
The Dow Jones Industrial Average fell 0.31 percent to 33,974.09 points at the start of the trading session on Wall Street. The benchmark Standard & Poor’s 500 index fell 0.37 percent to 4,332.74 points, while the Nasdaq Composite Index fell 0.91 percent to 13,424.36 points. And US stocks increased their losses in early trading, with the Nasdaq and Dow Jones down one percent.
European shares also fell in early trading to their lowest levels in seven months, with investors worried about the possibility of economic sanctions against Russia, which has ordered the deployment of troops in two separatist regions in eastern Ukraine.
The pan-European Stoxx 600 index fell 1.7 percent by 0810 GMT, down for the fourth consecutive session. The index fell about ten percent from its highest level ever recorded in early January (January).
The German stock index DAX seemed more affected than other European indices because of Germany’s heavy dependence on Russian gas supplies and the lack of energy companies listed on the index, which fell by 2.2 percent. The broader euro zone index fell 2.1 per cent, while Britain’s FTSE 100 index fell 1.2 per cent.
Investors are turning to relatively safe assets such as gold and government bonds, while the United States and its European allies are about to announce tough new sanctions against Russia.
While shares of oil and gas companies rose 0.7 percent, there were fears in the markets that the rise in commodity prices would increase inflation fears. Auto stocks and banks were the worst performers among European stocks, falling 2.7 percent and 3.1 percent, respectively.
On the same track, the Japanese Nikkei index closed lower for the fourth consecutive session, with the escalation of tension over Ukraine. The Nikkei fell 1.71 percent to 26,449.61 points, but it compensated part of the losses amounting to 2.5 percent. The broader Topix index fell 1.55 percent to 1881.08 points, to close down for the fourth session as well.
Shares of 199 companies out of the 225 companies listed on the Nikkei index declined, and the consumer services sector was the worst performer, and the basic materials and technology sectors also witnessed significant losses.
And warned the European Commissioner for the Economy Paolo Gentiloni that the crisis will exacerbate economic uncertainty for the European Union. “There is still uncertainty around us,” Gentiloni said at a conference in Brussels. The violation of international law by Russia’s recognition of two separatist regions in Ukraine will greatly increase this uncertainty.”
On the other hand, US President Joe Biden, his French counterpart Emmanuel Macron and German Chancellor Olaf Scholz warned that Russian steps would not go “without a response.” The White House announced that Biden would issue an executive order “prohibiting any new investment, trade, and financing of American citizens to, from, or in” the breakaway regions.
The prospect of war and the imposition of harsh sanctions have raised concerns about its repercussions on a range of supplies from the region, including oil, wheat and nickel. The rise in oil prices is exacerbating concerns about inflation around the world, while the US Federal Reserve is facing intense pressure to tighten monetary policy to avoid prices getting out of control.