The Russian economy has been rocked by the coronavirus outbreak, and the breakdown of the OPEC+ oil production pact between Russia and Saudi Arabia. The turmoil has shocked traders around the world and resulted in sharp volatility on the Russian stock markets and swings in the value of the ruble — both of which are down around 20% since the start of the year.
The latest on the markets, as of 10.30 Moscow-time March 18:
— The ruble slipped heavily overnight, trading at 76.8 against the U.S. dollar Wednesday morning in Moscow. Analysts say the mammoth stimulus package unleashed by the United States and other developed economies around the world accelerated a rush into dollar-backed assets, with currencies of emerging markets suffering.
— The Russian stock markets were knocked back, picking up from a poor session in Asian trading, and taking the steam out of a bounce in the U.S. markets overnight. The RTS index was down more than 4% at the open, and the MOEX Index shed more than 1%. Russia’s national airline, Aeroflot, was one of the biggest fallers, with Wednesday morning’s tumble meaning the company has now lost half its value — around $1 billion — in the space of four weeks.
— The ruble’s woes were compounded as oil prices once again started the day in the red, with benchmark Brent crude falling close to $28 a barrel, setting a new low not seen since January 2016. “The pressure on the oil market has been relentless, [and] risks remain to the downside as we move into the second quarter,” said ING’s Warren Patterson. “The demand picture continues to deteriorate as more countries implement shutdowns and put in place travel restrictions which have seen airlines cut capacity. Meanwhile the pickup in oil supply from April following the breakdown of OPEC+ talks does mean that these weak prices are likely to linger for quite a while longer. Lower prices are clearly going to hurt oil exporting countries.”
March 17, Moscow close:
— After picking up in the morning, the ruble slipped back to fall below the 75-mark against the U.S. dollar. A $1 bill would get you 75.2 rubles on the money markets Tuesday evening. The 1% daily fall would be big news on any number of other days, but following huge volatility over the last two weeks, traders might count today’s move as a sign of stability.
— The Russian stock markets also reversed their earlier upward trend, falling back in afternoon trading. The RTS index, denominated in rubles, was down 4.3% for the day and the MOEX Index dropped 2.8%. Construction group LSR fell more than 10%, followed by retailer Detskiy Mir and financial services group Tinkoff.
— Brent crude oil dropped back below $30 a barrel in Tuesday afternoon trading.
— “The situation remains tense, as the pandemic in Western economies has not yet passed its peak — and perhaps is the beginning,” said Sergei Suverov, analyst at BCS Premier. “Now the main question is whether the authorities will be able to help with large-scale anti-crisis stimulus to prevent mass bankruptcies.”
March 17, Moscow open:
— Markets were subdued Tuesday morning, with the huge overnight moves which have characterized trading in the last few weeks failing to materialize. The calm comes after another bloodbath on Wall Street on Monday, where stocks fell 12% in the worst daily performance in 33 years. “The Federal Reserve’s emergency move Sunday apparently failed to impress markets Monday, with investors questioning the efficiency of monetary policy for fighting the virus outbreak,” wrote VTB Capital’s Maxim Korovin in his Tuesday research note to clients.
— The ruble gained almost 1% overnight, trading at 74 against the U.S. dollar.
— The Russian stock markets registered small but steady gains, reversing some of yesterday’s losses. The dollar-denominated RTS index was up 1.6% to 982 points in the first minutes of Tuesday trading, while the ruble MOEX Index climbed by the same extent, moving back above 2,300. Blue chips Gazprom, Sberbank and Sistema were top of the leaderboard.
— Brent crude oil also climbed overnight, hovering slightly above the benchmark $30 a barrel price which traders have fixed on since the collapse of the OPEC+ deal earlier March.
March 16, Moscow close:
— The ruble fell again Monday, down 2.5% to start off the week, trading at 74.2 against the U.S. dollar. Earlier in the day, the currency fellow the benchmark level of 75 to the dollar.
— The Russian stock market also lost 5% as global stocks plummeted following an emergency rate cut from the U.S. Federal Reserve announced late Sunday. The RTS index, which is denominated in dollars, stood at 938 points (-5.4%), while the ruble-based MOEX Index was at 2,216 (-4.3%).
— Oil slipped to a fresh multi-year lows, with Brent crude falling 10% below $31 a barrel. Edward Moya, analyst at OANDA said: “Oil’s worst-case scenario seems to be coming true. The coronavirus is paralyzing economies across the world and no-one has any clue how much worse it will get. You can basically start pricing a complete collapse in crude demand for much of the world.”