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No love for Russia stocks as central bank hikes rates - "Desperation Move" IS EUROPE FINALLY ON BOARD?

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07/25/2014 12:31 PM
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No love for Russia stocks as central bank hikes rates - "Desperation Move" IS EUROPE FINALLY ON BOARD?
Is Europe finally on board? Sanctions from Europe mean a heck of a lot more than coming from the USA. Europe plays the good cop while America plays the bad cop, yet this is largely a European problem, Europe is being tested by Russia, and they now know just how weak it is.

MADRID (MarketWatch)—In what one investment bank called an ‘act of desperation,’ Russia’s central bank raised interest rates on Friday as investors continued to back away from the troubled country’s economy and stocks.

But the move did little to stanch the market’s losses.

Russia’s blue-chip MICEX index fell nearly 1.5% to 1,388 during Friday trade, after keeping a shaky hold on 1,400 for much of the week. The index fell below that big round number for the first time since mid-May on Monday but had since recovered.

The index is set to finish the week down 2.4%, and it’s off 7.7% for the year to date. It is among the worst performers in the emerging-markets world.

The Market Vectors Russia ETF RSX -1.44% and the iShares MSCI Russia Capped ETF ERUS -1.47% both slid 1.5% Friday. Each ETF is on pace for a weekly loss of nearly 3%, and RSX is down 15% in 2014, while ERUS is off 13%.

Midway through Europe’s trading day, the Bank of Russia raised its key interest rates to 8% from 7.5%, warning that “the aggravation of political tension” and the potential impact on the ruble means inflation could breach the bank’s 4% target in the medium term.

The ruble USDRUB fell after the rate hike. Russian stocks and the ruble have also seen pressure after European Union officials on Thursday threatened a ban on European bond purchases or shares sold by Russian state-owned banks.

The rate hike “smells of desperation,” said Lars Christensen, chief analyst at Danske Bank, in a note. “In our view, Russia is essentially already in recession and the hike will just makes matter worse for the economy, which is already suffering from significant currency outflow in relation to the crisis,”

See the rest of the story here:

[link to www.marketwatch.com]

Last Edited by prichard072885 on 07/25/2014 12:34 PM