Things are tough all over

[peternap]

Russia's two main bourses, RTS and MICEX, said on Wednesday they were suspending trade until further notice from the state's main market regulator as shares continued to tumble one day after their steepest decline in more than a decade.

The dollar-denominated RTS was down 6.4 percent and the rouble denominated MICEX was down 3.1 per cent when the suspension was enforced with the two main state-controlled banks, Sberbank and VTB leading the slide.

Traders at Micex, where early trading was suspended temporarily as investors ignored assurances by Russian officials
EDITOR'S CHOICE
Nerves jangle in emerging economies - Sep-16
Emerging market stocks take a dive - Sep-15
Pre-emerging economies grow increasingly attractive - Sep-07
Emerging market IPOs decline - Sep-04
The Short View: Emerging markets - Sep-03
Insight: There is still strong allure in emerging market equities - Sep-03

Earlier on Wednesday a high-level government source said the government would unveil measures aimed at stabilising the market situation in the next two to three days.

"Certain signs of a crisis are seen on the market but they are mostly emotional," the source who asked not to be named told the Reuters news agency.

"The measures which were agreed yesterday at a meeting chaired by First Deputy Prime Minister Igor Shuvalov will be made public within two or three days," he added.

Russian shares suffered their steepest one-day fall in more than a decade on Tuesday, losing up to 20 per cent, as a sharp slide in oil prices and difficult money market conditions triggered a rush to sell.

The heads of the Russian central bank, the finance ministry and the financial market regulator met on Tuesday night for an emergency discussion on ways to halt the crisis.

Earlier, trading had been suspended on both the Micex and RTS stock exchanges as investors ignored assurances by Russian officials and a cycle of distrust set in amid liquidity fears.

Margin calls forced domestic traders to liquidate positions and brokers pulled credit lines. At least one Moscow bank failed to meet payments.

The rouble-denominated Micex Index closed 17.75 per cent down, the sharpest one-day drop since the August 1998 financial crisis, while the dollar-denominated RTS index closed down 11.47 per cent, its lowest lvel since January 2006.

Interbank money market rates climbed to 11 per cent, their highest since a mini-banking crisis in summer 2004.

Chris Weafer, chief strategist at Uralsib investment bank: "We're in completely uncharted territory where the prevailing emotion is of fear and numbnes. No one knows where this could stop".

Alexei Kudrin, finance minister, insisted that the financial system was not in a systemic crisis but the central bank injected a record $14.16bn in one-day funds into the money market.

The finance ministry also placed an additional R150bn ($5.8bn) in one-month deposits into the banking system. Konstantin Korishchenko, central bank deputy, told Russian news agencies that the bank and the finance ministry could provide a total of $117.6bn in liquidity to the banking sector.

But market players said banks were ceasing to lend to second and third-tier companies and brokers were pulling credit lines. KIT Finance, big Moscow investment house confirmed rumours that it had been unable to make payment on a series of short-term loans.

It said: "In connection with the fact that a series of our clients did not meet their obligations to our bank, we have not met our obligations to our counterparties.

"We recognise our responsibility to our counter-parties and to the market and we are working intensively to resolve the situation."

Andrei Sharonov, managing director of Troika Dialog, a Moscow investment bank, and a former deputy economic minister, said: "This is a vicious circle," said , .

"It is a situation of total mistrust. The liquidity crisis is being caused by a crisis of confidence in which people are frightened to borrow and frightened to lend."

Shares in Russia's biggest state-controlled banks led the slide with Sberbank, the state-controlled savings bank, closing 21.72 per cent down and VTB losing 29.26 per cent. The bank was suffered on investor fears about its securities portfolio, which makes up about 10 per cent of its assets.

[muldoon]

yes, russia is taking a hit.  yesterday they lost 17% and shut the exchanges down, again today they lost 10% and shut down the exchanges. 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIRza4.azeC4&refer=home

Bond Market `Closed'
``The bond market remains effectively closed and banks are reluctant to lend to one another,'' said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. ``The problems experienced by KIT Finance have heightened counterparty risk and reduced liquidity further.''

They have hit the wall so to speak. 

On our side, I think something else needs to come up and be noticed.  The fed funds rate, the interest rate at which banks loan between each other.  Yesterday Bernanke held at 2, however if you look at the details you'll see target is 2 however the real rate is between 6 and 7.
http://www.ny.frb.org/markets/omo/dmm/fedfundsdata.cfm

Thats a divergence of 200-300%, That would mortgages in the 10-12% range, but lending is not going to be an option for long here.  There simply is not enough money to continue to service the debt and cover losses.  Once written off or defaulted, that money is gone from the system.  It is not being replaced. 

Did they not learn anything from the history books of the 20s and 30s?  Why are they making the exact same mistakes?

[NM_Shooter]

Very frightening times.  Many countries  often use wars to stimulate the economy.  We don't need this from Russia.

[muldoon]

exactly NM. 

Russia did most of this damage to themselves.  once they began nationalizing oil companies and seizing assets of companies trying to do business there ..  shell and bp, then began prepping for war it was a given that no sane person would invest in that market.  As the fires heated up and rush for the exit ensued, we got yesterday and today.  The news I am hearing now is that the market is not just closed for the day but indefinably.   

I agree, this is the stuff wars are made of.

[peternap]

They are saber rattleing over the Arctic again

http://www.telegraph.co.uk/news/worldnews/europe/russia/2976009/Russia-threatens-to-seize-swathe-of-Arctic.html

[apaknad]

heard on the news that NATO is still considering to bring georgia into the fold and also the ukraine is concerned about a takeover by russia(they should be).