Up down and everything in between as Russian markets await Bernanke
The overnight slump on Wall street flowed into Asian trade with major indices sharply lower before speculation about government intervention in Taiwan and Korea saw stocks reverse with the ASX closing higher in Sydney and Shanghai and Tokyo rebounding sharply to leave only Hong Kong wearing a 5% hammering.
Russian stocks started sharply down, built back to square within the hour and then proceeded to fall as much as 6.5% on the MICEX before rebounding late in the day to actually be as much as 1% higher within an hour of the close.
That was on the back of wild swings in Europe, buttressed by swings in crude prices, and the increasing expectation that US Federal reserve Chairman Ben Bernanke will make some accommodation for market sentiment this evening when he addresses the Federal Open Market Committee at 22:15 Moscow time.
Investcafe analyst, Anton Safonov, said any announcement of an impending resumption of quantitative easing may buoy equities markets.
“There can barely be something more important for market players at the moment than the results of the meeting at the U.S. Federal Reserve. At 22.15 Ben Bernanke will tell us about the state of the U.S. economy, its perspectives, and also about the actions of the Federal Reserve. Everybody is expecting the head of the Federal Reserve to at least make a hint about a new round of QE, and this will drive optimism back to the markets. To my mind, the launch of new quantitative easing will barely change the economic situation, as it didn’t succeed last time, but the equity market will certainly feel relief.”
Head of analysts at FOREX Club, Andrey Dirgin, said a key factor locally was the pressure on the rouble which lost a further 2% as crude prices slumped on global markets.
“As global stock markets slumped in panic, pulling currency and oil down, Moscow investors hedging their capital with dollar and euro currency amid rising fears that cheap oil could lead to a devaluation of the Russian currency. Now we see that Euro bounced back on the back of news from Europe where the main attention is drawn to the ECB decision to buy Italian and Spanish bonds. The Oil market avalanche intensified turmoil on Russian Stock markets.Investors turned to sell rouble in order to save their capital in other currencies such as dollar or euro.
I think CB will shortly come up with the decision on monetary support through series of interventions, however, I doubt that this measures could be positive for already burning Russian Stock exchanges. The dollar has jumped up over 30 roubles rate and Euro is already worth 42.8 roubles. The main signal for slide of the Russian currency is falling oil prices which have already reached $101 per barrel of Brent oil. Funds in correspondent accounts of credit institutions at the Bank of Russia decreased by almost 20% to 642 billion roubles in one week, adding pressure to the rouble. I assume the further developments will depend on global markets.”
Pavel Andreev, Head of FX markets at BCS agreed the slump in the rouble was attributable to the oil price, but expected that there would be some intervention if it looked like continuing.
“Rouble exchange rate falls are attributed to oil prices, Russian balance of payments and global stock markets. We are witnessing a serious decrease in oil prices leading to falling Russian stocks indexes. Above all the external pressure adds to falling currency rates. High oil prices have become attracted leverage for the rouble and now the situation is reversed but I do not expect rouble to fall much further than where it is. The Central Bank is likely to support it through monetary interventions. Ultimately, in anticipation of the up coming elections nobody wants to witness the situation of 2008. People have started active rouble purchasing mainly because of the coming elections and Christmas preparations. That will drive the currency cost up against the dollar.”