Russia “likes to think that anything the West can do…it can do better”, says Lex in the FT. “Apparently that goes for financial crises too.” Record falls – the rouble-denominated MICEX index lost 17% on Tuesday alone – caused Russia’s two exchanges to suspend trading for two days running last week for the first time since Russia’s debt default in 1998.
Energy firms have been falling due to the retreating oil price, while recent capital outflows have removed “the key source of liquidity from the system”, says Capital Economics – sending interbank rates up and bank stocks down. Forced selling has accelerated the downturn: highly-leveraged investors found themselves unable to meet margin calls and had to ditch assets. Two top oligarchs apparently face margin calls of up to $4bn. The government has made $130bn available to the financial markets, calming the frenzy.
Friday saw the markets make record gains. But the jitters are unlikely to be over soon. Small banks who missed out on the support measures have been selling assets this week, says Bloomberg.com, and Russia’s bulging coffers “are no substitute for investor confidence”, says Rosemary Righter in The Times. Given the global outlook, the latter remains in short supply.