NEW YORK/LONDON: The Russian rouble hit record lows yesterday while world stocks slid and oil prices jumped after the West ramped up sanctions against Moscow over its invasion of Ukraine, including blocking Russian banks from the Swift global payments system.
Russia's central bank increased its key interest rate to 20% from 9.5% and introduced some capital controls to bolster the rouble and fight inflation. Authorities ordered exporting companies to sell 80% of their foreign revenues as the rouble slid as much as 32% before recouping some losses.
After plunging 30% to a record low of 120 per dollar, the rouble recovered some ground, to trade down about 24% on the day at 111 per dollar.
The European arm of Sberbank, Russia's biggest lender, faces failure, the European Central Bank (ECB) said, an early sign of a looming economic crisis in Russia.
The fallout from tougher sanctions also rippled across financial markets outside Russia, especially in Europe where the main German and French bourses fell more than 3% in early trade but later pared most of those losses.
European banks were hit hard, with those most exposed to Russia, including Austria's Raiffeisen Bank, UniCredit and Societe Generale, falling between 9.5% and 14%. The wider eurozone index of 22 major banks lost 5.7%, but the pan-regional Stoxx 600 stock index closed down a scant 0.09% as sentiment improved at its close.
However, talks on a ceasefire ended without a breakthrough and a member of the Ukrainian delegation said the discussions were difficult as the Russian side was biased, news that darkened the mood on Wall Street.
The Dow Jones Industrial Average fell 0.49% to end at 33,892.6 points, while the S&P 500 lost 0.24% to 4,373.94. The Nasdaq Composite climbed 0.41% to 13,751.40, ending higher for the third straight session.
MSCI's all-country world equity index closed down 0.077%.
Markets are likely to remain choppy in the near term, analysts said. While valuations have fallen and some risks have been priced into the market, it's not time to derisk, Solita Marcelli, chief investment office for the Americas at UBS Global Weather Management, told clients in a note.
“Investors trying to trade off geopolitical events can easily get whipsawed,” Marcelli said, noting that sell-offs based on geopolitical events have been brief in the past.
Oil prices surged yesterday after Russian President Vladimir Putin on Sunday put nuclear-armed forces on high alert.
Brent crude settled up US$3.06, or 3.1%, at US$100.99 (RM424) a barrel after touching a high of US$105.07 in early trade. The Brent contract for April delivery expired yesterday. The most active contract, for May delivery, was up US$3.14 at US$97.26.
US West Texas Intermediate crude settled up US$4.13, or 4.5%, at US$95.72 after hittingUS$99.10 in early trade.
“The tight global oil market could become even tighter following last week’s Russian invasion of Ukraine,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
The White House said it hasn't ruled out restrictions on US purchases of Russian oil and gas.
The global economy faces significant economic and financial turmoil in Russia, the world's 11th largest economy, that will spill across its borders, analysts warned. – Reuters