The ruble and the Micex Index slid the most among emerging markets as pro-Russian protesters in eastern Ukraine seized government buildings and the nation’s premier accused Russia of seeking a “territory of slavery.”
The ruble fell 0.9 percent to 35.6575 by 6 p.m. in Moscow. The equities gauge closed down 2.4 percent at 1,349.79, the biggest drop since March 12. Yields on 10-year ruble-denominated government notes rose 15 basis points to 8.99 percent.
Stocks and the ruble halted three weeks of gains as protesters stormed administration offices in the Ukrainian cities of Donetsk and Luhansk, urging a boycott of the May 25 presidential election. The Donetsk demonstrators demanded a referendum to join Russia, prompting Ukrainian Prime Minister Arseniy Yatsenyuk to claim President Vladimir Putin was trying to split up Ukraine. The Crimea region joined Russia after a vote last month, prompting U.S. and European Union sanctions.
“The return of Ukraine headlines became the next signal to sell Russia,” Kirill Yankovskiy, a director for equity sales at UralSib Capital in London, said in e-mailed comments. “Doors of administration buildings in Donetsk and Kharkiv now move the Russian market more than doors of the Russian central bank.”
Ukraine’s dollar-denominated notes maturing in June fell 1.07 cents to 96.97 cents on the dollar, the lowest in two weeks. The Ukrainian Equities Index dropped 2.4 percent.
The situation in Ukraine risks worsening the “bleak” prospects for Russia’s economy and may keep pressure on the ruble this week, Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said in an e-mailed note.
Putin’s aim is to divide Ukraine and turn part of the country into “a territory of slavery under a Russian dictatorship,” Yatsenyuk said in televised remarks from Kiev. “It’s crystal clear an anti-Ukrainian plan” is under way, “a plan to destabilize the situation, a plan so that foreign troops cross the border.”
The scenes echo the actions of pro-Russian protesters who stormed Crimea’s assembly and paved the way for Putin to annex the Black Sea province last month.
The protests are ratcheting up tensions with Russian troops massed across the boarder and raising the prospect of tougher U.S. and EU sanctions.
“There are rumors that Donetsk in Ukraine is preparing a similar referendum as Crimea,” Renata Klita, an analyst at Blackfriars Asset Management Ltd., said by e-mail. “You simply cannot exclude escalation of the conflict.”
Russia is “closely watching” events in eastern and southern Ukraine, Russia’s Foreign Ministry said in a website statement today. Ukraine should stop blaming Russia for its problems and start a national dialog, the ministry said.
The ruble depreciated 1.2 percent to 41.6679 versus the central bank’s basket of dollars and euros by 6 p.m. in Moscow. The currency had strengthened 4.4 percent to the basket in the previous three weeks on speculation President Vladimir Putin wouldn’t take steps to break up Ukraine following the Crimea annexation. The U.S. and EU imposed some sanctions on Russian and Ukrainian officials following the move and have said they may intensify measures if Russia tries to destabilize Ukraine.
Brent crude slid for the first time in three days, losing 1 percent to $105.70 per barrel in London. Oil and natural gas comprise about 50 percent of Russia’s budget revenue.
OAO Sberbank fell 3.7 percent to 79.95 rubles, after Russia’s largest lender reported 2 percent profit growth in the first quarter, according to calculations based on Russian accounting standards.
Sberbank’s return on equity, which typically exceeds 20 percent, was about 19 percent in March, Olga Naydenova, an analyst at BCS Financial Group in Moscow, said by e-mail.
Deposit outflows reached almost 1 percent, “suggesting the population is withdrawing money from banks,” Naydenova said. The results “underscore negative trends that are materializing,” she said.
The Finance Ministry may publish today the terms for purchasing foreign currency for one of its sovereign wealth funds, deputy minister Alexey Moiseev said April 4, according to Interfax. The ministry, which needs to buy about 174 billion rubles for the fund, suspended the purchase of 212 billion rubles ($6 billion) on March 4 after the ruble fell to a record.