Ruble sinks, stocks sink as West tightens Russia sanctions
The ruble has fallen against the US dollar after Western countries tightened sanctions against Russia, blocking some of its banks from the SWIFT global payment system
The ruble fell to a record low of less than 1 US percent on Monday after Western countries tightened sanctions against Russia, blocking some of its banks from the SWIFT global payment system.
Shares in Asia were mixed, but US and European futures were sharply lower as President Vladimir Putin heightened tensions by ordering Russian nuclear forces to be on high alert.
Russia’s invasion of Ukraine has caused markets to swing wildly, considering its potential impact on inflation, energy supplies and other economic repercussions.
Putin ordered Russian nuclear weapons ready to launch on Sunday, raising tensions with Europe and the United States, which revived dormant fears from the Cold War era.
Over the weekend, Japan joined moves by the US and other Western countries to impose sanctions against Russia, including a ban on access to the SWIFT system for some Russian banks.
The central bank sanctions target access to more than the $600 billion in reserves that the Kremlin holds, hindering Russia’s ability to support the ruble as it depreciates in value.
The ruble was quoted at 105.27 against the dollar at the beginning of Monday, down from about 84 rubles against the dollar on Friday. The previously announced sanctions took its currency to an all-time low against the dollar in history and gave its stock market its worst week on record.
The end of the month usually brings a slew of economic data, but for now the conflict is eclipsing other issues.
“It is about the Russia-Ukraine situation and developments in that situation will drive market sentiment and direction,” Oanda’s Jeffrey Haley said in a commentary.
“President Putin must now accept that the ‘Western’ powers are now ready to bear a little economic pain to punish Russia,” he said.
US futures fell, with the S&P 500 contracting 2.5% and the Dow down 1.6% for industrials. Germany’s DAX futures dropped 3.2% and the FTSE 100 futures dropped 1.3%.
Markets in Asia appeared to be taking the latest developments more calmly.
Japan’s Nikkei 225 index rose 0.1% to 26,514.79 from earlier losses. The Hang Seng in Hong Kong fell 0.8% to 22,584.17. The Shanghai Composite Index was down 0.1% at 3,449.52. The Kospi climbed 0.6% to 2,690.28 in Seoul, while the S&P/ASX 200 in Sydney gained 0.7% to 7,049.10.
While the war in Ukraine is unlikely to cause direct damage to Asia, high energy prices are an unwanted burden for oil-importing countries such as Japan, especially as they still struggle to recover from the pandemic.
Underscoring the deep rifts caused by the conflict, BP said on Sunday it was exiting its 19.75% stake in Rosneft, a state-controlled Russian oil and gas company it has held since 2013. That stake is currently valued at $14 billion.
Oil prices rose on Monday in US benchmark crude, up $5.33, or 5.8%, at $96.92 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, it had fallen by $ 1.22 to 91.59 per barrel.
Brent crude rose $4.31 to $98.33 a barrel, up 5.6% and hit the $100 a barrel level last week.
On Friday, the S&P 500 climbed 2.2% to close its first weekly gain in three weeks at 4,384.65. The Dow Jones Industrial Average rose 2.5% to 34,058.75. The Nasdaq Composite rose 1.6% to 13,694.62 after swinging between modest gains and losses. The Russell 2000 Index rose 2.3% to 2,040.923.
The Ukraine conflict has piled up uncertainty over interest rates and other concerns about inflation.
The US Federal Reserve has suggested it will increase short-term interest rates by doubling its usual increase next month, the first rate hike since 2018. Higher US rates put downward pressure on all types of investments, and can have global consequences.
In currency trading, the US dollar fell from 115.77 yen to 115.54 Japanese yen. The euro fell from $1.1157 to $1.1145.