Following a 150bps rate hike by the central bank - the largest since the 1998 default -desperate to halt capital outflows and a collapsing currency, Russian stocks have crashed 11% led by some of the country's largest banks. USDRUB rose to just shy of 37 - the weakest RUB rate on record - but rallied back a little on the rate hike but the MICEX stock index tumbled 11% to almost 2-year lows with Sberbank (Russia's largest bank) down 17% and VTB (2nd largest bank) down 20%. Between the threat of economic sanctions from the West and simple risk-aversion-based capital flight, as one analyst noted, "uncertainty risks a further escalation in domestic capital outflow."
MICEX is down 11% today alone...
Ruble at record lows against the USD...
It was the biggest increase in a Russian benchmark rate since June 1998, less than two months before Russia defaulted on domestic sovereign bonds and devalued the currency. The refinancing rate used to be the central bank’s main reference.
The Banks have been battered...
- Sberbank, Russia’s biggest bank, drops 17%, loses most since 2008
- VTB, Russia’s second-bigest lender, tumbles 20%
- Bank St. Petersburg falls 16%
- Bank Vozrozhdenie declines 10%
- Nomos Bank slides 12%
European and U.S. leaders have threatened sanctions against Russia, creating risks that economic growth will stall, demand for the country’s assets will dry up and a selloff in the currency will deepen. "There is a risk of international backlash against Russia at a time when the economy faces an increasing need for foreign capital inflows... This uncertainty risks a further escalation in domestic capital outflow."
Around the world, stock markets are tumbling with Europe down around 2% - almost its largest drop in 7 months; and Japan down 600 from Friday's highs.