The ruble declined to the lowest level in three weeks and stocks fell after Russia and the U.S. blamed one another for deadly unrest in Ukraine. Bonds dropped as the European Union weighed new sanctions.
The currency lost 0.7 percent versus the central bank’s target basket of dollars and euros to 42.1508 at 6 p.m. in Moscow, the lowest level on a closing basis since March 24. The Micex Index retreated 1.3 percent to 1,344.86 by the close, its weakest close this month. The yield on the government’s ruble-denominated bonds due in February 2027 climbed 13 basis points to 9.13 percent.
European Union foreign ministers, gathering for a meeting today in Luxembourg, said the bloc should be prepared to impose a third round of sanctions, including economic measures, as armed separatists in eastern Ukraine ignored a deadline to free official buildings they’ve occupied. At least one serviceman was killed during weekend tension that prompted an emergency meeting of the United Nations Security Council.
“Escalation in eastern Ukraine is pushing the ruble lower,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said in e-mailed comments. “No political solution is visible at the moment, and investors are concerned about further sanctions, and even a risk of a possible civil war.”
The EU has blacklisted 51 Russian and Ukrainian political and military figures and is looking at how to inflict stiffer punishments without harming Europe’s still-struggling economy, such as by provoking Russia to cut off gas and oil deliveries. The U.S. also imposed sanctions on certain officials following Russia’s annexation of Ukraine’s Crimea region last month.
The ruble weakened 0.9 percent to 35.9660 per dollar, extending its loss this year to 8.5 percent, the most among 24 developing-country currencies after Argentina’s peso.
“The risk of meaningful economic or sector-based sanctions against Russia is rising sharply,” Bank of America Corp. analysts Vadim Khramov and Vladimir Osakovskiy said in an e-mailed report.
The currency also fell before data this week that may signal economic growth is slowing. Industrial output expansion probably decreased to 0.5 percent in March from 2.1 percent a month earlier, data may show tomorrow, according to the median of 17 estimates compiled by Bloomberg. Retail sales growth also declined to 3.3 percent in March from 4.1 percent in February, a separate survey showed before a report on April 17.
The Finance Ministry was due to start buying the equivalent of 3.5 billion rubles ($97 million) of foreign currency today from the central bank for one of its sovereign wealth funds. The purchases will be counted against its daily interventions, which at current levels amount to $200 million per day.
Equities on the Micex Index trade at the cheapest valuations among 21 developing countries monitored by Bloomberg.
OAO Sberbank, the nation’s biggest lender, dropped 1.8 percent to 78.35 rubles, while its preferred stock tumbled 3.3 percent to 64.98 rubles. VTB Capital lowered the preferred shares to hold on April 11, saying the bank’s decision to pay equal dividends on ordinary and preferred stock was “strongly negative.”
OAO Novatek, the nation’s second-largest natural gas producer, lost 1.9 percent to 339.50 rubles. OAO Gazprom, the nation’s biggest natural-gas producer, declined 2.2 percent to 131 rubles.
“Ukraine is the main source of tension and uncertainty in the market,” Andrey Verkholantsev, the head of research at Kapital Asset Management LLC in Moscow, said by phone. “The drop is tied to the escalation of the crisis in south eastern Ukraine and concerns a military conflict will start.”