HONG KONG, China – The ruble and equity markets experienced a decline on Monday as traders closely monitored Russia following an aborted mutiny over the weekend. This mutiny, led by the Wagner mercenary force under the command of Yevgeny Prigozhin, raised concerns about stability in the nuclear-armed country and highlighted possible cracks in President Vladimir Putin’s grip on power. The rebellion also added to unease on trading floors due to worries about rising interest rates and stubborn inflation.
The ruble weakened to 87 to the dollar, its lowest level since March last year during Putin’s invasion of Ukraine. While equity markets appeared to remain calm, most major indices were in the red. Asian markets such as Hong Kong, Tokyo, Sydney, Shanghai, Taipei, Bangkok, Singapore, Mumbai, and Wellington experienced a decline, while Seoul, Manila, and Jakarta saw gains. European markets in London, Paris, and Frankfurt also fell upon opening.
Oil prices rose due to Russia’s major role as a producer, but concerns about demand resulting from rising interest rates limited the gains. Futures for European natural gas, on the other hand, experienced a significant jump.
The mutiny occurred after Prigozhin criticized the Russian military’s handling of the war in Ukraine for months. Prigozhin and his Wagner mercenaries returned to their base after Putin agreed to spare him from treason charges and allow him to live in exile in Belarus. However, US Secretary of State Antony Blinken stated that the events revealed vulnerabilities in Putin’s rule. While the agreement between the parties halted an immediate escalation of the crisis, market observers warned that any further instability in Russia could impact global markets.
Investors also paid attention to comments from Federal Reserve officials in anticipation of clarity regarding monetary policy plans. Last week, Fed Chair Jerome Powell’s remarks that rates would likely continue to rise dashed hopes that the bank had reached the end of its tightening cycle. This came amidst announcements of further rate hikes in other countries. Atlanta Fed chief Raphael Bostic expressed comfort in maintaining borrowing costs for the rest of the year, while San Francisco president Mary Daly projected two more quarter-point hikes. Both officials emphasized that decision-making would depend on data.
Investors are growing concerned that the global tightening cycle could negatively impact the global economy, with the eurozone already experiencing a technical recession at the beginning of the year. There is also a focus on China and its leaders’ plans to support the economy as it faces difficulties in recovering from the impact of zero-Covid restrictions. Investors were disappointed last week by the lack of specifics regarding growth stimulation, with a market rally sparked by interest rate cuts losing momentum.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
