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Russian stocks hit by new sanctions, rouble rallies to six-week highs

Economy Apr 06, 2022 01:46PM ET
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2/2 © Reuters. FILE PHOTO:A board with the logo is on display outside the office of the Moscow Exchange in the capital city of Moscow, Russia March 24, 2022. REUTERS/Maxim Shemetov 2/2
 
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(Reuters) - Russian stock indexes fell on Wednesday, hit by a new set of Western sanctions over Moscow's actions in Ukraine, while the rouble rallied in thin trade to a six-week high.

Equities largely lost ground after the United States announced a new round of sanctions targeting Russian financial institutions, as well as Kremlin officials and their family members. Russia calls its actions in Ukraine a "special military operation" and denies targeting civilians.

The new sanctions hit Russia's Sberbank, which holds one-third of Russia's total banking assets, and Alfa Bank, the country's fourth-largest financial institution, U.S. officials said. But energy transactions were exempted from the latest measures, the officials said.

The rouble-based MOEX Russian index ended the day 1.9% lower at 2,611.4, heading further away from an all-time high of 4,292.68 reached in October.

Shares in Sberbank underperformed the market after the new sanctions, falling 8.1% to 141.60 roubles ($1.78) per piece.

Its rival, the second-largest lender VTB, shed 4.9% on the day.

Sberbank and Russia's largest private lender Alfa Bank have both said new U.S. sanctions would not have a significant impact on the banks' operations.

Downside pressure on shares emanating from negative sentiment around news on Western sanctions could be limited as the government has promised to support Russian companies by buying their stocks with money channelled from the rainy-day National Wealth Fund.

The Russian stock market is showing "miraculous resilience" to sanctions and a rapid drop in activity in the domestic manufacturing and services sectors in the absence of foreign investors that are still barred from taking part in trading in Russia, Finam brokerage said in a note.

The dollar-denominated RTS index received support from the weaker dollar and rose 3% to 1034.79.

ROUBLE RALLY

The Russian rouble extended recovery gains on Wednesday, returning to levels seen before Russia sent tens of thousands of troops to Ukraine on Feb. 24 as it headed further away from an all-time low of nearly 121.53 to the dollar and 132.41 to the euro it hit in Moscow trade in March.

The Russian currency also shrugged fears that Russia edged closer to a potential default on its international debt as it paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.

The rouble added more than 4% on the day to 79.70 to the dollar, having earlier hit 79.01, a level last seen on Feb. 23. The market turnover in the main session reached $706 million, far below an average of $4 billion to $6 billion seen before Feb. 24.

Against the euro, the rouble gained 5% to 87 after hitting 85.5975, its strongest since Feb. 17, supported artificially by capital control measures and a ban on buying cash forex.

The rouble is driven by export-focused companies selling foreign currency and a low activity of importers, Promsvyazbank said, adding that it cannot be ruled out that the Russian currency firms to 74-76 to the greenback in coming days.

The rouble is also likely to retain support from the central bank's monetary policy as inflation accelerated to a seven-year high of 16.7%.

The central bank, which raised its key rate to 20% in an emergency move in late February, will next meet on rates on April 29.

($1 = 79.7500 roubles)

Russian stocks hit by new sanctions, rouble rallies to six-week highs
 

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Comments (5)
Brad Albright
Brad Albright Apr 06, 2022 10:06AM ET
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Russian stock market is down 40% since Putin launched his murderous rampage. Russia is heading back to the dark ages for Putin's folly.
Ciby Jose
Ciby Jose Apr 06, 2022 9:50AM ET
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Be ready for a multi polar world... USA is not the only super power... Afghanistan was too much...  USA has no strength to help Ukraine, except by words.... Germany etc wants Russian oil & gas... So Russia is in strong position and the Ruble shows it ... Anyway, Ukrainians should be appreciated for holding up against mighty Russia
Brad Albright
Brad Albright Apr 06, 2022 9:50AM ET
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You misunderstand the US ambitions in Afghanistan. First objective was to find Osama Bin Laden whom the Taliban would not turn over. Second objective was to secure an environment where the Afghan people could build a democracy and enter the modern world. US decide 20 years was enough. US did not leave because of military defeat.
Shane Weddle
Shane Weddle Apr 06, 2022 9:50AM ET
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Brad Albright lol UBL was in pakistan the whole time. The entire 20 year campaign was myopic and fruitless. Ask me how i know lol.
gab nea
gab nea Apr 06, 2022 9:34AM ET
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hate to say this article is a lie, but it's mighty disingenuous and false.
gab nea
gab nea Apr 06, 2022 9:30AM ET
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not only their market is grossly manipulated by putin, but he lies about just everything, like our ex. orange face painted guy.
jason xx
jason xx Apr 06, 2022 5:00AM ET
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Get this Russian propaganda out of here. Russian stocks shrugged off nothing no one Is allowed to sell them. If it was a free market it would collapse in 30 seconds
 
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