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6 Oct, 2008 10:55

Sell! Sell! Sell! RTS and Micex slump as global markets reel

A wave of selling has again engulfed the world’s equities’ markets on Monday. Russian markets have continued to tumble despite predictions they would rise off the back of emergency measures taken in Washington and Europe.

Russia's Micex was down more than 16% after being closed for an hour from around 2 pm Moscow time, then again at 3.30pm and yet again at 5.45pm.

The RTS fell below the psychologically important 900-point mark on Monday, and also suspended trade, but eventually reopened.

The multi-billion-dollar bailout package announced by Congress and the EU pledge made on Sunday to protect savers seems to have had little effect.

London's FTSE index and the main stock exchanges in Germany and France lost about 6 % in morning trading.

Asian stock markets had similar falls. Tokyo and Hong Kong closed more than 4% lower.

An even bigger factor locally, however, has been a weekend slide in commodity prices, in a renewed belief that economic growth around the world will slump, slashing demand for a range of commodities.

Adding to the gloom is the weekend fall in oil prices with Dated Brent and Nymex futures both below $US 90.

EU has a bailout of its own

Banks around the world are the centre of focus once again after the German Government stepped into bail out Hypo Real Estate, the country’s largest home lender, on Sunday. In an even bigger development the German Government agreed to guarantee bank deposits. Christian Democrat parliamentary leader Volker Kauder made it clear that public confidence in the finance system was at stake.

“It was a guarantee that was given, and if it was not given, many more institutions would have got into difficulties. That is why this guarantee is not for the bank managers, but for the stability of the system, and also for us to be able to tell people in this country: your savings are safe.”

Germany is the third country in the Eurozone to offer some form of guarantee within the last week, following on from Ireland and Greece. Any hope that the financial chaos which has engulfed the United States could be contained there has now evaporated, despite Congress approving a $US 700 billion bailout of the U.S. financial system on Friday. While the world was waiting for Congress to come up with a deal, banks in Belgium, Iceland and the UK went to the wall in one way or another, with the mounting sense of crisis starting to turn to panic.

In Moscow that feeling towards financial stocks is seeing Sberbank and VTB taking big hits. Afternoon trade saw VTB down more than 18% following an announcement that it had lost $US 360 million in September. Meanwhile, Gazprom fell by over 20% on the RTS.

Norilsk Nickel lost 23% on the MICEX and 32% on the RTS, amid speculation about what Oleg Deripaska may do with his stake in Norilsk in the wake of Friday's announcement that the  financial backers of his stake in Canadian car parts manufacturer, Magna, were realising the stake.