Stocks, ruble drop as traders eye Russia after aborted uprising

HONG KONG, China  -The ruble and most equity markets sank Monday as traders kept watch on Russia following an aborted mutiny at the weekend that stoked concerns about stability in the nuclear-armed country.

While the advance by the Wagner mercenary force led by Yevgeny Prigozhin was called off before it reached Moscow, analysts said the rebellion showed President Vladimir Putin’s grip on power was more fragile than previously thought.

It also added to unease on trading floors, where investors last week reversed a recent rally in stocks owing to concerns about ever-rising interest rates aimed at fighting stubborn inflation.

The ruble sank to 87 to the dollar — its weakest level since March last year in the early days Putin’s invasion of Ukraine — as traders reacted to the developments in Russia.

Bloomberg said banks had priced it as much as 100 to the dollar at one point Saturday before coming back as Prigozhin halted his advance on Moscow.

On equity markets traders appeared to take the events in stride, though most major indices were in the red.

Hong Kong, Tokyo, Sydney, Shanghai, Taipei, Bangkok, Singapore, Mumbai and Wellington all slipped though Seoul, Manila and Jakarta rose.

London, Paris and Frankfurt all fell in opening trade.

Oil prices rose as Russia is a major producer, but concern about demand owing to the impact of rate rises kept gains limited, while futures for European natural gas jumped soared.

The revolt came after Prigozhin had railed for months against the Russian military’s handling of the war in Ukraine.

But Wagner mercenaries returned to their base Sunday after Putin agreed to allow Prigozhin to avoid treason charges and accept exile in neighboring Belarus.

However, US Secretary of State Antony Blinken said the events exposed “real cracks” in Putin’s rule.

The agreement halted an escalation of the crisis but observers warned that markets were susceptible to any further instability in Russia.

“Even though the Prigozhin mutiny may not cause larger market movements directly, this could quickly change depending on how the political situation in Russia unfolds in coming months,” Erik Meyersson, at SEB AB, said.

“Markets will likely become more sensitive to internal political matters in Russia.”

Investors were also keeping tabs on comments from Federal Reserve officials, hoping for clarity on their monetary policy plans after boss Jerome Powell last week warned rates would likely keep rising.

His comments dealt a blow to hopes the bank had come to the end of its tightening cycle, and came as authorities elsewhere announced further hikes.

On Friday, Atlanta Fed chief Raphael Bostic said he would be “comfortable” holding borrowing costs where they are for the rest of the year, though San Francisco president Mary Daly warned two more quarter point hikes are a “very reasonable projection”.

Both, however, said decisions would be data-dependent.

There is a growing worry among investors that the tightening cycle around the world could hammer the global economy, with the eurozone already tipping into technical recession at the start of the year.

There is also a focus on China and leaders’ support plans for the world’s number two economy as its recovery from years of zero-Covid restrictions falters.

Traders were left disappointed last week by a lack of detail on how to kickstart growth, with a market rally sparked by interest rate cuts running out of steam.

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