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Turmoil Spreads: Ruble Replunges, Crude Craters, Yen Surges, Emerging Markets Tumbling
For those wondering if the CBR's intervention in the Russian FX market with its shocking emergency rate hike to 17% overnight calmed things, the answer is yes... for about two minutes. The USDRUB indeed tumbled nearly 10% to 59 and then promptly blew right back out, the Ruble crashing in panic selling and seemingly without any CBR market interventions, and at last check was freefalling through 72 74 76, and sending the Russian stock market plummeting by over 15%.
It is so bad, US equity futures which had jumped earlier on hopes of more Chinese intervention following the latest disastrous Chinese PMI print, as well as a French manufacturing PMI beat (don't laugh), are back to unchanged.
The latest rout continues to be driven by the relentless plunge in Brent which also continued crashing overnight to fresh 5 year lows, sliding decidedly under $60 as WTI dropped well under $55 as well. And as we previewed over a month ago, it is not just Russia, but every single petroleum exporting country that is suddenly seeing a currency crisis, and spreading to all EMs with the Indian Rupee weakening the most since 2013, Indonesia lowering the Rupiah's reference rate by the most on record, and so on. Ironically, this happens as the USDJPY is also crashing and dropping moments ago to 116.25, the lowest level since mid-November. At this rate the Fed will have no choice but to intervene, however in the opposite direction, and admit that despite all its best intentions, the US can not decouple from the rest of the world and a rate hike - so very priced in by everyone - is just no going to happen in the coming years (which sadly means that the latest subprime debt driven "recovery" is about to be called off).
A quick look at the oil market where Brent drops for 5th day, falls below $60 for 1st time since July 7, 2009 as the market continues to look for signs that falling prices is crimping production. WTI breaks below $55, drops to lowest since May 6, 2009. "The race to the bottom continues, we are still not seeing any signs of supply disruption,” says Saxo Bank head of commodity strategy Ole Hansen. “There is very big negative momentum in the mkt and the fact people are starting to talk about breakeven levels of $35-$40 has put up a new red flag for mkts to aim at.... Jan. WTI options expire today and there is quite a lot of open interest ~$55 put strikes, that is probably the key level of potential support today.”
Not helping things was Russia's announcement that it too like the Saudis will not cut production: Russia agrees with OPEC that market will determine crude price, Energy Minister Alexander Novak tells reporters at meeting of Gas Exporting Countries Forum in Doha, Qatar. Novak says that he met with OPEC energy ministers in Vienna; "The participants of that meeting concurred that the situation will be fixed by the market itself in terms of supple and demand balance. Russia is not a country that changes its supply. We will maintain our production unchanged.”
Looking at the Markets, first in Asia, the Nikkei 225 tumbled -2% fell for a 2nd day to breach the key psychological 17,000 level for the first time since the 17th Nov. as the JPY continued to strengthen. In China bad news was good, and the Shanghai Comp surged higher som +2.3% on renewed easing calls following disappointing Chinese data. December HSBC flash Manufacturing PMI printed a contractionary reading for the first time in 7 months (49.5 vs. Exp. 49.8 (Prev. 50.0), with both output and new orders components slipping, the latter contracting for the first time since April. Hang Seng traded down 1.55% weighed on by weakness across energy stocks.
Despite opening higher, European stocks took a turn lower in early trade, with the move to the downside led by energy names after Brent crude futures broke below USD 60/bbl pre-market and WTI broke below USD 54/bbl. Furthermore, the softness in stocks lifted European fixed income products with the Bund tripping stops through 154.73, leading the German 10yr yield to once again print record lows and slip below 0.6%. Overall global sentiment remains relatively negative with Saudi Arabian (-5.5%) and Dubai (-8%) stock indexes also placed under further pressure as the fall in oil prices continue to dent domestic profits. Furthermore, concerns were also placed on Russia as despite the Russian central bank hiking their rate by 650bps, the RUB hit record lows vs the USD and the MICEX was down as much as 7%. This then triggered fears over the ramifications for the Eurozone economy, given the close trade ties to Russia, particularly for Germany.
Nonetheless, European equities then reversed earlier losses, with the move higher led by utility and consumer discretionary names, while Russian asset classes began to stabilise. Additionally, from a data perspective, Eurozone PMIs also painted a less dreary than expected picture with the headline manufacturing and services Eurozone PMIs exceeding expectations. This was then later exacerbated by a particularly strong German ZEW survey (Expectations 34.9 vs. Exp. 20.0), which also subsequently saw Bunds pull away from their best levels.
Looking ahead, attention turns towards US housing starts, building permits, manufacturing PMI and API crude oil inventories. Most importantly, the two-day FOMC meeting begins.
Market Wrap
In Summary, European stocks rise led by carmakers after German investor expectations increased more than estimated. Shares with exposure to Russia dropped as the ruble continues its decline. Asian stocks fall as Hong Kong shares enter a correction, U.S. stock index futures gain. Brent crude oil price falls through $60 a barrel for the first time in 5 years. Euro rises against the dollar.
- S&P 500 futures unchanged, after being up 0.5%
- Stoxx Europe 600 up 0.7% to 325.44
- US 10Y yield down 2bps to 2.1%
- German 10Y yield down 1bps to 0.61%
- MSCI Asia Pacific down 0.7% to 134.73
- Gold spot up 0.4% to $1198.55/oz
M&A
- Repsol Agrees to Buy Canada’s Talisman for $8.3b
- RBS Sells Irish Property-Loans Portfolio to Cerberus
- InterContinental to Purchase Kimpton Hotels for $430m
- Wanda Said to Be Poised to Raise $3.7b in Hong Kong IPO
- Woodside to Pay $2.75b for Apache LNG Project Stakes
- Olam to Buy Archer-Daniels-Midland Cocoa Unit for $1.3b
FX/BONDS
- USDJPY down to 116.290
- Euro up 0.5% to $1.25065
- Dollar Index down 0.4% to 88.064
- Italian 10Y yield up 2bps to 2.02%
- Spanish 10Y yield up 1bps to 1.8%
- 3m Euribor/OIS down 1bps to 9.38bps
COMMODITIES
- S&P GSCI index down 1.7% to 434.07
- Brent futures down 2.8% to $59.33/bbl, WTI futures down 2.6% to $54.46/bbl
- LME 3m copper down 0.7% to $6357.25/MT
- LME 3m nickel down 1.6% to $16192/MT
- Wheat futures down 0.1% to $618.25/bu
Bulleting Headline Summary
- European stocks rebound from earlier energy/Russia-inspired losses as Eurozone data helps to lift investor sentiment.
- The USD-index trades in negative territory, with the move lower in US yields hitting the greenback and seeing EUR/USD break above 1.2500.
- Looking ahead, attention turns towards US housing starts, building permits, manufacturing PMI and API crude oil inventories.
- Treasuries gain as Brent crude plunges though $60/bbl for first time in five years, ruble slides to record low as investors shrug off surprise Bank of Russia decision to hike its key rate to 17% from 10.5%.
- HSBC/Markit’s China PMI fell to 49.5 in Dec., lowest in seven months, from 50 in Nov., even after PBOC efforts to ease monetary conditions
- Manufacturing and services in the 18-nation euro area barely expanded in December as sluggish growth in Germany and France kept business activity subdued
- Bundesbank’s Jens Weidmann said there’s no need for the ECB to expand monetary stimulus, and argued that sovereign-debt purchases aren’t a solution even if slumping oil prices cause deflation
- German investor confidence rose for a second month, with ZEW Center’s index rising to 34.9 in Dec. from 11.5 in Nov.
- U.K. inflation fell to 1% in Nov., lowest in more than a decade, as tumbling oil prices pushed down transport costs and food prices dropped; U.K. 30Y yields fell below 2.5% for the first time on record
- Sweden’s central bank kept its main interest rate at zero and said it’s preparing more measures to jolt the largest Nordic economy out of a deflationary spiral
- Norway’s krone dropped to parity with Sweden for the first time since 2000
- Bank of England Governor Mark Carney said the selloff in emerging markets may worsen, posing the risk of higher borrowing costs and weaker growth in core markets
- China’s U.S. Treasury holdings fell to a 20-month low in October, as yuan appreciation indicated less of an impetus to buy the government securities
- Pakistan militants killed 84 children after storming an army-run school in the northwestern city of Peshawar, one of the country’s worst terrorist attacks in years
- Sovereign yields mostly lower. Nikkei falls 2% as most Asian equity indexes fall; Shanghai +2.3%. European stocks mostly higher, U.S. equity-index futures gain. Brent crude falls 3%, trades below $60/bbl level; copper falls, gold gains
US Event Calendar
- 8:30am: Housing Starts, Nov., est. 1.040m (prior 1.009m)
- Housing Starts m/m, Nov., est. 3.1% (prior -2.8%)
- Building Permits, Nov., est. 1.065m (prior 1.080m, revised 1.092m)
- Building Permits m/m, Nov., est. -2.5% (prior 4.8%, prior 5.9%)
- 9:45am: Markit US Manufacturing PMI, Dec. preliminary, est. 55.2 (prior 54.8)
Central Banks
- FOMC two-day meeting begins in Washington Supply
FX
The main focus has been on the RUB as despite the Russian central bank hiking their key rate by 650bps, USD/RUB has erased its opening losses, with RUB printing a record lows vs. USD and breaking above the 66.00 handle. Allied to this, the USD-index has weakened throughout the morning and made a technical break below 88.00 alongside the move lower in US yields as USTs benefited from a flight to quality. This has also benefited JPY and CHF in a safe-haven Bid, while EUR/USD broke above 1.2500 for the 1st time since 1st Dec. UK inflation data came in at 1.0% vs. Exp. 1.2% and printed its lowest reading since 2002. This subsequently saw a fast-money move lower in GBP/USD of around 46 pips. However, this move to the downside was later reversed, as market participants focused on the fact these numbers do not change the course of BoE action. Finally, the SEK has also weakened throughout the session after the Riksbank this morning kept their key rate on hold at 0.0% as expected but warned the repo rate needs to remain at zero for longer than initially forecast and are preparing further measures that can be used to make monetary policy more expansionary. This has also weighed on neighbouring currency NOK, which also falling victim to the slide in oil prices.
COMMODITIES
In the commodity complex, energy prices have once again been a key focus after Brent crude futures broke below USD 60/bbl pre-market and WTI broke below USD 54/bbl. This has been a continuation of the bearish rhetoric we’ve seen for the sector following comments yesterday from the UAE oil minister who said OPEC stands by their decision not to cut output even if oil prices fall as low as USD 40/bbl and will wait at least three months before considering an emergency meeting, while Saudi reiterated they have no plans to cut output. In metals markets, precious metals have been granted some reprieve with spot gold breaking above USD 1,200 following the cautious sentiment throughout the session while copper has remained under pressure following lacklustre Chinese HSBC manufacturing data and comments from Deutsche Bank who said the copper market is moving into surplus and the lagged effects of the weaker Chinese property market will hit copper demand.
* * *
DB's Jim Reid concludes the overnight recap
We were expecting difficult times before tighter spreads in 2015 but this is already proving to be such a tough December that 2015's returns across many asset classes are going to be influenced by where we end the year.
For example, as recently as December 5th many equity markets were trading at YTD or multi month highs. 6 business days later and the turmoil is being seen in Greece, Russia, Oil, many areas of EM and in DM equity and credit markets. In Europe virtually all equity markets are comfortably down for the year now. Some markets have lost a few years of normal sized returns in the last few days alone so this has to impact 2015.
Given the mini turmoil, we will truly learn a lot about the Fed tomorrow night as if they become more hawkish we can see that they're comfortable that financial markets are not the primary concern. If they end up being dovish then it's probably a sign that they will struggle to have the confidence to upset markets in 2015 and will only raise rates if both the economy merits it and markets are calm. As we state in the outlook we think they will struggle to raise rates but this might not stop them from signalling an intention to do so in advance. So definitely more volatility than the QE3 period we've now left far behind.
Oil continues to dominate headlines with further sharp declines yesterday, extending the 5-year lows and pairing an earlier rally. Indeed both WTI (-3.29%) and Brent (-1.28%) declined to $55.91/bbl and $61.06/bbl and have continued to trade some 0.5-0.6% lower overnight. The oil-sensitive Russian Rouble continues to suffer and yesterday it closed 10.22% lower versus the Dollar at 64.24. The move marked the biggest one-day decline since 1998 taking the year to date decline to nearly 96%. The move appears to have sparked the nation’s Central Bank into action who, post the U.S. close, raised benchmark interest rates by 650bps to 17%. The rate rise marks the sixth hike this year and comes just five days since the last rate move with the Central Bank stating that ‘the decision was driven by the need to limit the risks of devaluation and inflation, which have recently significantly increased’. The move also corresponds with an expansion in foreign currency repo auctions of $3.5bn to $5bn as well as further statements from the Central Bank that GDP may shrink 4.5% to 4.7% next year should oil prices average $60/bbl. The MICEX closed 2.38% lower yesterday and 10y benchmark local government bond yields finished 20bps wider at 13.02%. Expect big moves again this morning. The Russian central bank will no doubt be hoping they can repeat the success of the Turkish central bank earlier this year where they raised rates from 7.75% to 12%. If the new rate is sustained for any length of time it will surely have huge implications for the economy though so it's certainly high risk. Ironically when Russia collapsed in 1998, the Fed slashed rates and arguably started the era of 'moral hazard'. So it'll be interesting if the Fed choose to ignore international events this time round. I suspect they'll find it tough.
Returning to markets, in the US the S&P 500 closed 0.63% lower at the close after a volatile day which saw a near 2% intraday range. Energy stocks continued to weigh on the overall index with the component declining 0.71% although in reality all sectors finished weaker. Credit markets softened, CDX IG closing 2bps and CDX HY around half a point lower and spreads on US HY energy names widening a further 18bps. Pressure on smaller oil and gas producers continues with US-based Apache reporting yesterday that it has agreed to sell its stake in a natural gas project whilst the Canadian oil and gas company Talisman Energy confirmed it’s in talks with various targets over a potential sale of the company.
Macro data was perhaps a bright spot in an otherwise weaker day. An initially weaker December NY Fed manufacturing reading (-3.58 vs. +12.4 expected) was followed up by a stronger November industrial production (+1.3% vs. +0.7% expected) print and capacity utilization (80.1% vs. 79.4%) reading. On the firmer industrial production print in particular, the reading was the highest since May 2010 and our US colleagues note that at its current level, production is growing at a near 8% annualized rate relative to its Q3 average, supporting the case for a strong Q4 GDP number. Just rounding off the data prints in the US yesterday, the NAHB housing market notched down slightly to 57 for December. Treasuries took something of a back seat, the yield on the 10y benchmark bouncing off Friday’s lows to close 1.8bps higher at 2.118%.
Closer to home and with a lack of data releases, risk assets took a sharp leg lower in Europe with the Stoxx 600 closing 2.08% lower - with similar weakness in energy names (-2.95%) – the index now 1.5% in negative territory YTD. There was similar weakness in credit markets with Xover finishing 19bps wider. Whilst core yields closed largely unchanged, supportive comments from ECB officials Visco and Nowotny helped support peripheral bonds with 10y benchmark yields in Spain (-9.1bps), Italy (-6.8bps) and Portugal (-5.6bps) all closing tighter at 1.789%, 1.996% and 2.916% respectively. Recapping the comments, the ECB’s Visco commented in Rome that the central bank could begin large-scale asset purchases ‘rather quickly’ if deflation risks continue citing the threat from oil price declines. This was followed up by Austria’s central bank governor Nowotny who stated that any further QE measures would be the ‘prospect of missing our target on price stability in the longer term’. One of the ECB’s preferred measure of inflation expectations - the EUR 5y5y inflation swap rate - extended declines to close at 1.67% yesterday and mark a 10-year low. With chatter around further ECB broad-based asset purchases likely to attract more headlines in the new-year, a Bloomberg survey yesterday showed that 90% of respondents expect sovereign QE in 2015 from 57% last month.
Interestingly with the large sell off in risk assets in Europe yesterday, Greek equities closed firmer ahead of tomorrow’s election with the ASE ending +1.45% stronger at the end of play. Greek government bonds also recovered somewhat with 3y and 5y yields tightening 87bps and 34bps respectively. DB’s resident expert George Saravelos noted that there is little change in terms of current government support ahead of tomorrow’s first-round presidential election (due 5.00pm GMT) with initial ‘bean-count’ estimates still below the 180 votes required for the final vote.
Turning our attention over to markets this morning, following the disturbing scenes in Sydney yesterday, the ASX 200 is -0.65% and AUD is holding in at 0.82 to the Dollar. With the exception of China, equities are weaker in Asia this morning with the Nikkei, Hang Seng and KOSPI -1.85%, -1.40% and -0.83% respectively. The CSI 300 (+1.03%) and Shanghai Comp (+0.85%) have strengthened despite a weak flash HSBC manufacturing PMI print. The 49.5 reading for December is below the 49.8 consensus and down from 50 last month with the print the first below 50 since May.
Looking ahead to today’s calendar and away from the start of the FOMC meeting, we kick this morning off in Europe with the flash manufacturing and services PMI prints for the Eurozone as well as regionally for both France and Germany. Elsewhere we’ll keep an eye on the BoE statement on the financial stability report due out this morning with Carney speaking shortly after, as well as UK inflation data. We round off the key releases this morning with the ZEW survey out of Germany. Across the Atlantic this afternoon we’ve got housing data to keep an eye on with both building and November housing starts due. This is followed up later in the US with the flash manufacturing PMI print.
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Last I checked Barry gave Putin "flexibility", clitongue did a reset, space launches were given to Putin and NASA became mooslime outreach, and Barry ran around the world apologizing for the US.
Tell me something. Are things better or worse? Better or worse?
If I was Putin I would sell all my US treasuries and buy the options of Comex....and stand for delivery....that would screw up the Westerners big time
Russia with the help of China needs to start fighting back and reveal the weaknesses of both the ECB and the US Fed. There are many.
One central bank currency crisis deserves another.
What if TPTBthen just change the rules...
say forget you...we do what we want...
Would the spectacle be enough?
I never forget Hunt Bros
Governments worldwide loosing confidence in western c/b fiat as the printing continues. The value of work and production is lost in a sea of worthless fiat.
The BRICS need to attack the US dollar as the Federal resorts to QE 4 to infinity.
Beware the rubber band, lest it take your face off.
Pendulums swing.
The Saudis help Obama out with Russia by destroying oil prices.
It also destroys shale and tar sand profits which now turn into substantial losses.
Deflationary and leads to the next US crisis and QE4.
Ruble crash will destroy financial system
latest:
http://tersee.com/#!q=ruble&t=text
Doomed? Bad news. Who's gonna get them nukes!
"Falling oil is great for Russia. This is just what Putin wants...that sly bastard" - ZH Putin Fellatio Brigade
Low oil fucked up US more than anybody, massive systemic debt risk comes to the edge, look over at the ruble, while the US is about to jump over the cliff...and hand trillion dollar losses to the public.
US ends up with gigantic debt, countries like Russia have low debt to GDP by comparison.
Thing is US and Europe headed for the tip....all too soon.
Russia will suffer short term..but its low debt is a god send. USD massive gigantic debt, will suffer in short and long term.
What USA desperately needs now is for somebody to bomb the shit out of Saudi Arabia.
why doesnt China sell Tres/JGB and sell USD/Yen and buy Ruble to help Russa (and use proceeds to pay for current/future contracts they have in yaun/ruble.. ie and other countries that have contracts with Russia ie while ruble is so cheap///
Obama and banks pressured the Saudis to crash oil to destroy Russsia.
Now we will see shale and tar sand companies go bankrupt.
Massive layoffs in 2015. Fed announces QE4 and continues QE to infinity.
The BRICS need to attack the US dollar once QE4 is announced and destroy the COMEX over-subscription fraud.
Looks like 2015 will be an interesting year.
From Houston: many layoffs already
Hercules Offshore cuts 400
and that not shale
there will be thousands in Texas, OK without work
Shale already was backing off a year ago...
leases made 3 years back were not being drilled.
Americans don't mind losing their jobs - it makes them feel European - after all the game is to start another war if they can't get inflation
The Chinese will bail out Putin and we should expect even more transfers of advanced military technologies between Russia and China. In the end, Washington will find it just fucked itself.
China has 250 bill in JGB .. 1.2 trill tres.. the JGB yield literally nothing.. they can switch to ruble.. get 15% and pay out future agreements.. hello...
This is the nail in the coffin for the western system. Countries are going to look at how manipulated oil and currencies have become and move to isolate themselves from the system.
This is the nail in the coffin for the western system. Countries are going to look at how manipulated oil and currencies have become and move to isolate themselves from the system.
yeah supply and demand changes what ? 3-5% tops year over year. Believe me it is a huge change for the physical world.
now we witness oil going down how much ? 20-30-50% ? WTF ? Speculation is dominating the markets
"Manhattan, fucking Kansas "
Now that is an insult of insults and OVER the line sir.
why would any investor stay in the zero interest hevily debted US/Japan/EU when the bricks have much less debt and much higher rates... the miss allignment is too large eventually the 10-14% yields in EM vs literally zero in Japan/US/EU is going to have some impact...
Russia and China can help the Federal Reserve crash the US dollar and turn it's money printing game into a currency crisis. Help the Fed when the anounce QE and state with other countries they'll no longer accept US dollars.
Yellen, Williams, Evans, Dudley, Rosengren and Bullard want inflation. They'll get more than they could ever dream of once they announce QEing again.
I think China and Russia know America's game. China observing, knows the US in desperation will play the same game with it in time. Is why China understands it must have close ties with Russia - BRICS as a counter to a flailing US.
China and Russia will with their friends build stong defence cooperation and hardware coordination to degrade the leverage of the US and its myriad bases,
tresuraies are about to crash... China other bricks will sell..
Haven't read the article in full, got as far as '...blew right back out'
.......... Spat coffee all over my monitor, nice one guys, quality reportage.
Considering the US is waging war against Russia much as it did against Japan up to 1941....." In 1939 the United States terminated the 1911 commercial treaty with Japan. “On July 2, 1940, Roosevelt signed the Export Control Act, authorizing the President to license or prohibit the export of essential defense materials.” Under this authority, “[o]n July 31, exports of aviation motor fuels and lubricants and No. 1 heavy melting iron and steel scrap were restricted.” Next, in a move aimed at Japan, Roosevelt slapped an embargo, effective October 16, “on all exports of scrap iron and steel to destinations other than Britain and the nations of the Western Hemisphere.” Finally, on July 26, 1941, Roosevelt “froze Japanese assets in the United States, thus bringing commercial relations between the nations to an effective end. One week later Roosevelt embargoed the export of such grades of oil as still were in commercial flow to Japan.”
http://www.independent.org/newsroom/article.asp?id=1930
Japan running out of food. Eating Yen should keep everyone alive.
http://mobile.abc.net.au/news/2014-12-16/mcdonalds-japan-rations-chips-a...
doesn't matter much what they claim for the ruble here...since as of yesterday:
Early in the week, Russia announced they are moving up the testing for their newly proposed currency clearing system. It had been planned for a May, 2015 testing phase followed by going live, this is now moved up to Dec. 15th, yes, this Monday! Why? Why are they moving up the start date? Presumably they also know something or see the immediate need to be able to clear funds for trade outside of SWIFT. If you think this one through, Russia will have the ability to facilitate ANY trade between ANY two or more parties while excluding the use of dollars …and the prying eyes of America! This will mean whatever sanctions on Russia will be lessened, it also means SWIFT is no longer the only game in town. Maybe the BRICS et al will no longer care, or need to use SWIFT? No, not “maybe”, definitely.
here's a link to the above info plus one other paragraph
http://www.globalresearch.ca/gold-financial-markets-and-the-international-monetary-system-one-foot-on-a-banana-peel-the-other-in-a-grave/5419975
The next dot to connect was the spending package passed by Congress. As Zerohedge reported Presenting The $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For , the U.S. public was sold down the river. Just a month after the Republicans won both houses of Congress, they have now allowed the banks to stuff their derivatives portfolios under the FDIC umbrella. Over $300 trillion worth! Prior to this, the FDIC insured over $6 trillion worth of bank deposits with a whopping $54 billion reserve… How could any “true American” have voted for this? Even a calculator with no batteries can understand this will unequivocally bankrupt the country, yet this law is passed little over one month after an election by the American public put trust in the Republicans as their “last hope”? Was this passed by mistake or do you think they knew what they were doing? Was Obamacare passed by mistake? Comically, the architect of Obamacare testified to Congress after calling the American public stupid …a traitor testifying to traitors, they should all be strung up for TREASON! Whether you know it or not, Congress just called the American public stupid also by passing this traitorous law.
you should watch this---the coming BIG RIP-OFF, all set-up, of course it will become a Generational IOU for We The US Peole
https://www.youtube.com/watch?v=Ey20x-VlDYQ
Ellen Brown-5 Big Banks will Survive Next Financial Calamity-Everybody Else Bankrupt
What a ride, scream if you wanna go faster
the US is showing that if you dont play they can put sanctiions/ freeze assets ect.. why hold so much tres...the bricks must get out and trande in own currency for oil ect.. direct..
This is a weak ploy by Obama which will backlash because US/Japan/ EU owe the money... they have the bonds that can be sold...
The Japanese will also wake up that if ruble can drop like that maybe getting 0.04bp on 5y.. is not so good value..
This does not matter a bit, the currency reserves Russia has is very small.
Currency, Fiat, whatever you want to call it is a belief system. The belief that the currency being used and held will hold its value, when a currency, any currency, is perceived to be weak the loss of faith in the currency and subsequent value will always plummet.
Mother Russia needs a financial tactician who can convince Putin that his military and state decisions are not financially healthy for Mother Russia.
Still short on Putin's moves and ability to swallow pride for the good of long term Russian wealth and subsequent power.
Might makes right but all might comes from a strong economy and currency.
He just need an advisor that will tell him to back RUB with gold, and defaulting Crimex (and US) by taking delivery... A gold backed RUB would never got screwed like that by speculator.
Dec. 16 (Bloomberg) -- Richard Haass, president at Council on Foreign Relations, and Bloomberg’s Henry Meyer and Hans Nichols discuss the fallout from the ruble reversing the biggest gain in 16 years against the U.S. dollar following a rate hike to 17 percent by the Russian Central Bank and whether or not the Russian economy is heading for a repeat of the default of 1998. They speak on “Bloomberg Surveillance.”
Russia took its biggest step yet to shore up the ruble and defuse the currency crisis threatening its stricken economy.
In a surprise announcement just before 1 a.m. in Moscow, the Russian central bank said it would raise its key interest rate to 17 percent from 10.5 percent, effective today. The move was the largest single increase since 1998, when Russian rates soared past 100 percent and the government defaulted on debt.
The ruble lost 2.5 percent to 66.0985 against the dollar as of 12:53 p.m., reversing an early gain prompted by the news.
The announcement, as well as its timing, underscored the financial straits in which Russia now finds itself. If sustained, the new higher rates would squeeze an economy that is already being hurt by sanctions led by the U.S. and European Union, and by a collapse in oil prices. Some analysts said they doubted the economy could withstand such high rates for long.
“This move symbolizes the surrender of economic growth for the sake of preserving the financial system,” said Ian Hague, founding partner at New York-based Firebird Management LLC, which oversees about $1.1 billion, including Russian stocks. “It’s the right move to make, and it wasn’t easy to make it.”
‘Ruble Zone’The ruble, which has depreciated 50 percent this year against the dollar, is the worst performer among more than 170 currencies tracked by Bloomberg. It gained almost 11 percent today, before weakening to a record.
“In order to limit the negative effects of such depreciation of the national currency on the Russian economy, we decided to increase the key rate,” Russian central bank Governor Elvira Nabiullina said on state TV channel Rossiya 24. “We really must learn to live in the ruble zone, rely to a large extent on our own sources of financing.”
So far this year, Russia has spent $80 billion of its foreign-exchange reserves in an unsuccessful attempt to prop up the ruble, which tumbled past 66 against the dollar for the first time. The currency’s collapse has evoked the turmoil of the 1998 Russian crisis, an event that reverberated through financial markets around the world.
Emergency GatheringThe Russian central bank announced the increase -- the sixth this year -- after policy makers gathered for an unscheduled meeting.
“This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” the central bank said in the statement. President Vladimir Putin, whose annexation of Ukraine’s Crimean peninsula in March prompted the U.S. and its allies to strike back with sanctions, this month called for “harsh” measures to deter currency speculators.
“While such drastic tightening measures will inflict more pain on the economy, we have been arguing for a while that it is not about preventing recession, but full-scale financial turmoil caused by the precipitous ruble fall,” said Piotr Matys, a currency strategist at Rabobank International in London.
Brent, the grade of oil traders look at for pricing Russia’s main export blend, lost as much as 3.3 percent to $59.02 on the London-based ICE Futures Europe exchange, trading below $60 a barrel for the first time since July 2009.
Losing SteamRussia derives about 50 percent of its budget revenue from oil and natural gas taxes. As much as a quarter of gross domestic product is linked to the energy industry, Moody’s Investors Service estimated in a Dec. 9 report.
The economy may shrink 4.5 percent to 4.7 percent next year, the most since 2009, if oil averages $60 a barrel under a “stress scenario,” the central bank said yesterday. Net capital outflow may reach $134 billion this year, more than double last year’s total.
Others were more optimistic, saying the action was big enough to arrest the ruble’s record decline. “The central bank is trying to stop the avalanche, and such a massive hike may be sufficient,” said Slava Breusov, an analyst at Alliance Bernstein in New York. “No one seems to be thinking what it will do to the economy, as the priority is to stop the ruble plunge.”
WARNING Amerikan Patriot is a TRoLLER/paid SHill (check his history)
all he does is post MSM/ CNN articles like this one is from : http://www.bloomberg.com/news/2014-12-15/russia-increases-key-interest-r...
CAN SOMEONE PLEASE ban him
thank you
Bipolar CNBC right now:
"Housing Starts, Permits Fall, Pointing To Recovery"
You can't make this shit up.
My trading platform say that on 17 December the USDRUB and EURRUB will increase the margin requirement due to volatility who is actually at 50:1.
So it will be what ? 10:1 ? 5:1 ? Margin call in perspective ?
The Russian central bank's dramatic rate hike further threatens financial stability in the troubled economy and is thus unlikely to put a floor under the country's currency or stocks, say analysts.
The Central Bank of Russia (CBR) unexpectedly hiked rates by 650 basis points to 17 percent overnight after the beleaguered ruble plunged to a fresh record low. The currency rebounded to 60.00 to the U.S. dollar following the move but has since crumbled during Tuesday's session and hit a fresh all-time low of 73.1708 by midday London time.
"This is essentially a panic situation, the central bank took the most drastic action they could think of," Uwe Parpart, managing director and head of research at Reorient Financial Markets told CNBC.
The rate hike will further tighten domestic liquidity, putting a strain on the domestic corporate sector and reinforcing economic weakness, Parpart noted.
"You can expect credit issues facing various companies and banks, so there's a real issue of financial stability for Russia," he said. "It's a pretty bad situation, the only place worse off is Venezuela."
Oil price stability will be the main determinant of stability in Russian assets, Parpart said. The price of oil - Russia's main export and revenue source - has fallen 46 percent in the past six months due to abundant supply—partly from U.S. shale oil—and low demand growth.
"If oil prices continue to drift lower, the central bank's measures will be overcome by more panic in a matter days."
Further Downside
With such uncertainty, it's much too early for investors to gain exposure to Russia, he said.
David Riedel, president and founder at Riedel Research Group says trying to find a bottom in Russian assets is akin to catching a falling knife.
"I think there's a lot further downside in the Russian situation," he said. "I have nothing but sympathy for you if you own a lot of Russian stocks."
On top of the collapse in oil prices, the economy faces the risk of new U.S. sanctions, Riedel notes.
U.S. Congress on Monday sent President Barack Obama legislation setting out further sanctions on Russia. Administration officials say the president is assessing the measure, which would target Russia's energy and defense industries, according to the Associated Press.
Rate hike not enough?
Stan Shamu, strategist at IG does not expect a sustained turnaround in Russian assets on the back of central bank action either.
"Given the sanctions the country is also facing, any recovery in the ruble and domestic assets could be short lived," he said.
Benoit Anne, strategist for Societe Generale, on the other hand, believes CBR's action is a "game changer" in the course of the ruble.
"After weeks of lamenting over the central bank's indecisiveness, I am at last impressed by the policy response," he said. "Game on. The CBR now means business."
Investment Opportunity?
Nicholas Ferres, investment director, global asset allocation, says Russian government bonds may warrant another look following the central bank's move to defend its currency.
"Russia has the means to pay their sovereign obligations and even cover the corporate obligations," he said.
"Therefore, following the dramatic collapse in price, the now aggressive central bank action and Russia's ability to pay, sovereign [debt] is very attractive in both the dollar and particularly in local currency terms."
WARNING Amerikan Patriot is a TRoLLER/paid SHill (check his history)
CAN SOMEONE PLEASE ban him
thank you
What was the middle part?
I've been waiting to read this article for over a week: http://www.stratfor.com/weekly/viewing-russia-inside
You have to be a shill for the State Deparment. Out of control hubris from a greedy bastard of the federal govenment.
Another favorite Zero Hedge meme, torn to shreds:
"Vladimir Putin is a competent leader and will lead Russia to prosperity."
Hilarious!
WARNING Amerikan Patriot is a TRoLLER/paid SHill (check his history)
CAN SOMEONE PLEASE ban him
thank you
Probably works for the State Deparment. Has an office next to that arsehole Jen Psaki.
CHAOS!!!
Maxwell Smart will do away with the FED