Russia’s stock market plunged on Monday as war fears sparked a sell-off, with tens of billions of dollars wiped from the value of some of the country’s top companies.
As concerns mount that President Vladimir Putin is about to order an invasion of neighboring Ukraine, the ruble has also hit a 14-month low, prompting the central bank to intervene by halting its regular purchases of foreign currency to help prop up the ruble.
“The Bank of Russia has decided not to buy foreign currency on the domestic market,” the bank said in a statement. “This decision was made to reduce the volatility of the financial markets.”
The bank regularly converts revenue from the country’s oil and gas exports to prevent the ruble from being affected by fluctuations in the value of global raw materials.
The bank did not provide details on when it would resume buying foreign currency. The ruble was down 2.3% in early trading on Monday, but stabilized after the bank’s announcement.
Meanwhile, the Russian stock market plunged more than 10% on Monday, but fell 7% when trading concluded. Since the start of the Russian military buildup on Ukraine’s borders in October, the market has lost more than a quarter of its value.
Anders Aslund is chair of the International Advisory Council of the Center for Social and Economic Research, a policy group in Warsaw, Poland. Aslund predicts that the market could fall much further if the geopolitical confrontation between Russia and Western powers over Ukraine worsens.
“So far the Russian RTS USD stock index has only fallen 27% from its highest point on Oct 27 before Putin started threatening Ukraine,” Aslund tweeted. “It has much more to fall. In 2008, it fell by 80% from May to October (Georgian war + global financial crisis)”.
Meanwhile, European stock markets have been fairly stable in recent weeks, a cheer that isn’t necessarily reassuring, analysts say, as European stock markets didn’t miss a beat in the immediate aftermath of Archduke Franz Ferdinand’s assassination in Sarajevo in 1914. , an assassination that triggered World War I.
The London and Paris stock markets “were slow to understand why Sarajevo was different and unique,” said Ambrose Evans-Pritchard, international business editor at The Telegraph.
European investors and traders on Monday seemed to pay more attention to geopolitical maneuvering, with markets pulling back on news that Britain would join the United States in removing some diplomats and their families from embassies in Ukraine’s capital Kyiv. .
Stock markets in Germany and France fell about 2% in early trading, with analysts saying a New York Times The report that US President Joe Biden is considering deploying 5,000 troops to bolster the defenses of Ukraine’s NATO neighbors added to the nervousness.
The London stock market also traded lower. Some analysts suggested the declines were as much a result of traders looking at what the US Federal Reserve might do to tighten monetary policy as a result of the Ukraine crisis.
With the crisis deepening, the attention of Western markets and policymakers is turning to the potential energy implications for Europe, which gets about half of its natural gas supply from Russia. Fears have grown that the Kremlin could retaliate by halting gas exports should the West impose new sanctions on Russia. The result would be an energy shock for a continent already mired in an energy crisis and experiencing sky-high prices.
“If tensions between Russia and Ukraine escalate, initial uncertainty around their impact on gas flows would likely lead the market to once again add a significant risk premium to European gas prices,” Goldman analysts said. Sachs to customers.
Last week, the Reuters news agency reported that the US State Department has been drawing up a global strategy to increase liquefied natural gas supplies to Europe in case a Russian invasion of Ukraine causes gas shortages.
Amos Hochstein, the State Department’s senior energy security adviser, has been holding talks with several countries in the Middle East and North Africa, as well as companies in Europe, about how to increase gas supplies if Russia seeks to convert energy into a weapon.
In London on Monday, British Prime Minister Boris Johnson told reporters the intelligence on Russian intentions was “grim” but added that a Russian invasion was not inevitable.
“The intelligence is very clear that there are 60 Russian battle groups on the borders of Ukraine. The plan for a blitzkrieg that could wipe out Kyiv is one that everyone can see. We need to make it very clear to the Kremlin, to Russia, that that would be a disastrous step,” Johnson said.
He added: “We also need to send a message (to Moscow) that invading Ukraine, from a Russian perspective, will be a painful, violent and bloody affair. I think it is very important that people in Russia understand that this could be a new Chechnya.”
He was referring to the brutal wars between Russia and Chechen rebels in the 1990s that left tens of thousands dead. Chechnya had waged wars of independence against Russia.
Speaking as Britain began withdrawing some embassy staff from Ukraine, Johnson said: “We think it is prudent to make some changes now.”