New sanctions hit Russian assets, spook world shares

Thu Jul 17, 2014 8:28am EDT
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By Marc Jones

LONDON (Reuters) - A tightening of Western sanctions on Russia rattled world markets on Thursday, sending Moscow stocks and the rouble tumbling and lifting traditional safe-haven currencies and bonds.

The new U.S. sanctions announced late on Wednesday effectively shut off longer-term dollar funding for companies close to President Vladimir Putin. European Union leaders agreed to target Russian firms that help destabilize Ukraine, and to block new loans to Russia through two development banks.

Such measures had been threatened for weeks, but the decision to push ahead unsettled investors who had questioned the appetite to do so, especially in Europe.

Moscow's MICEX .MCX stock market fell 2.9 percent, its dollar-traded cousin, the RTS index .IRTS, dropped 4.5 percent and the ruble RUB= lost more than 1 percent against both the dollar and the euro.

"From the West's perspective they could not have chosen a better time to intensify sanctions," said Societe Generale strategist Regis Chatellier. "Until a few weeks back, Russia was in a position of relative strength because there was massive pressure on oil, but that is not the case any more."

Safe-haven assets were given a broad lift, with concerns now that Moscow - which provides much of Europe's gas - could hit back with retaliatory measures.

The sanctions are aimed at tightening pressure on Moscow to help calm the crisis in Ukraine, where hundreds of people have been killed in months of fighting between government forces and pro-Russian separatists.

The Russian Foreign Ministry said it saw the American sanctions as "a primitive attempt to avenge the fact that developments in Ukraine are not following Washington's scenario," and that it was disappointed that Europe had "succumbed to the blackmail of the U.S."   Continued...

People walk past an electronic information board at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth