MOSCOW: The rouble tanked yesterday, slipping past 80 against the dollar, while stocks plunged to their lowest in over a year as Russian President Vladimir Putin called for the immediate recognition of two breakaway regions in eastern Ukraine.
Putin signed a decree recognising the breakaway regions in eastern Ukraine as independent entities, upping the ante in a regional crisis the West fears could erupt into war.
The rouble fell to as low as 80.0650 against the dollar during Putin's lengthy televised address to the Russian nation but pared some losses as Putin announced his decision, which he said would find support among Russian people.
The sharp drop in the rouble from levels around 70 to the greenback seen just four months ago is expected to fuel already high inflation, one of the main concerns among Russians, which would dent the country's already falling living standards.
By 1956 GMT, the rouble fell 2.7% to 79.37 against the dollar. It had been as strong as 76.1450 earlier in the session. Against the euro, the rouble had lost 2.6% to 89.79 after hitting 90.7850, a level last seen in April 2021.
No Russian assets were left unscathed, with stocks cascading to their lowest since early November 2020 and bond yields, which move inversely to prices, soaring to their highest since January 2016.
The dollar-denominated RTS index finished the day 13.2% lower at 1,207.5 points and the rouble-based MOEX Russian index lost 10.5% to 3,036.9 points.
Yields on Russia's 10-year benchmark OFZ bonds hit a high of 10.64%. The cost of insuring Russia sovereign debt against default also surged to its highest since early 2016 and both Moscow and Kyiv's sovereign dollar bonds tumbled.
Goldman Sachs analysts said it now seemed plausible that geopolitical risks in the Ukraine-Russia standoff were starting to have a meaningful impact on global assets.
The prospect of a possible summit between Putin and US President Joe Biden, as well as upcoming talks between the United States and Russia's top diplomats on Feb 24, had given investors a glimmer of hope earlier in the session.
Major European markets too slumped yesterday after the Kremlin downplayed prospects for a summit between Biden and Putin.
While the news of a possible summit brought relief to the markets, the Kremlin pouring cold water of the prospects of an immediate meeting unnerved investors.
Both the Frankfurt and Paris stock markets both fell by more than 2% after the announcement.
Losses in London, at 0.1%, were limited by hopes for the UK economy as Prime Minister Boris Johnson announced a relaxation to pandemic legal curbs in England.
US markets were closed yesterday for the Presidents Day holiday.
London’s FTSE 100 closed down 0.1% at 7,484.33 points, Frankfurt’s DAX shed 2.1% at 14,731.12 and in Paris, the CAC 40 lost 2% at 6,788.34. The Euro Stoxx 50 ended 2.3% lower at 3,982.24
Meanwhile, oil prices rose over the stand-off between Russia and the West over Ukraine, adding to supply concerns that have kept oil prices near US$100 (RM417) a barrel.
Brent crude futures jumped US$2.74, or 2.91%, to US$96.28 a barrel by 1910 GMT. US West Texas Intermediate crude futures rose US$2.79, or 3,06%, to US$93.86 a barrel at 1915 GMT.
“Oil prices are once again marching upwards, as the optimism of a Biden-Putin meeting fades, while Opec+ is continuing to struggle to hit its quotas which have largely created the severe global energy deficit,” said Pratibha Thaker of the Economist Intelligence Unit. – Reuters, AFP