Russian stocks and the ruble came under sharp pressure on Thursday, after the U.S. revealed fresh sanctions against the country over its failure to end the fighting in Ukraine, and as analysts fretted about increasing tension between the two nations.
The new sanctions, announced Wednesday, would bar Russian companies such as oil giant Rosneft and Gazprombank OAO, the nation’s third-largest bank, from obtaining new financing from U.S. capital markets.
As the months-long Ukraine crisis returned to the foreground for investors, they began to back away from Russian stocks. The blue-chip MICEX index tumbled nearly 3% to 1,433.61, its biggest fall in nearly a month. The index is now down over 4% for the week. Russian stocks were hit earlier this month, after a renewal of hostilities in Ukraine. The Market Vectors Russia ETFRSX -4.21% lost 4% in premarket trade on Thursday, while the iShares MSCI Russia Capped ETF ERUS -4.25% shed 2%.
European stocks XX:SXXP -0.76% also came under pressure as Russia/Ukraine worries resurfaced. Not only is Europe closer to Russia, but many companies in the region carry out trade with Russian businesses. Analysts said European investor confidence has taken a knock on fears the sanctions could damage European economies. U.S. stock futures were coming under increasing pressure on Thursday, with Russia taking a portion of the blame.
Tensions also intensified after a spokesman for Ukraine’s Security Council accused a Russian jet of shooting down a Ukrainian SU-25 attack plane, which was on military operations over eastern Ukraine Wednesday night, media reports said. The pilot ejected safely from the plane.
U.S. (additional) sanctions are significant and targeted, President Barack Obama said.
“Because Russia has failed to meet the basic standards of international conduct, we are acting today to open Russia’s financial services and energy sectors to sanctions and limit the access of two key Russian banks and two key energy firms to U.S. sources of financing, and to impose blocking sanctions against eight arms firms and a set of senior Russian officials,” said David S. Cohen, undersecretary for terrorism and financial intelligence, in a notice on the Treasury’s website.
While the measures won’t freeze the assets of those Russian firms, nor prohibit most transactions, those companies won’t be allowed to access U.S. equity or debt markets for new financing with a maturity beyond 90 days, Deutsche Bank analysts said in a strategy note .
Source: Marketwatch
