As Global Oil Market Gets Into Turmoil, Russian Currency Fall Intensifies, Frustrating Putin’s Ambitions
The rouble – the Russian national currency, is weakening more and more against the dollar and the euro as well as plummeting oil price as the exchange rate of the U.S. dollar has exceeded R75 for the first time since February 2016.
The dollar exchange rate for “tomorrow” jumped R2.14 to R75.0950, and the single European currency - R2.11 to R84.2125, reports say. The May futures for Brent crude oil fell 7.1% to $33.24 per barrel, PRIME reports.
According to Dmitry Babin, stock market expert at BCS Broker, “the rouble suffers heavy losses by updating 4-year lows to the dual-currency basket amid falling global markets and oil prices.”
At the same time, the head of the Alpari IAC Aleksandr Razuvayev points out that "the reserves of the Bank of Russia are significant, and Viktor Gerashchenko, twice the head of the Central Bank of Russia, would not have allowed devaluation."
“However, the current Bank of Russia is a supporter of the free exchange rate, plus a weak rouble is beneficial to the budget. The Central Bank is likely to intervene only if the US currency goes to 90-100 roubles per dollar,” the analyst believes.
Meanwhile, the Russian stock market is falling. So, as of 0259 p.m. Moscow time, the Mosbirzhi rouble index fell 5.48% to 2336.38 points from the previous close, the RTS dollar index fell 9.05% to 987.83 points.
The fall in indicators intensified today after the WHO called the spread of coronavirus a pandemic. Igor Galaktionov, a stock market expert at BCS Broker, notes that “the official announcement of the pandemic and the closure of the United States for flights from Europe triggered another wave of sales in global financial markets.”
We should add that yesterday economist Jesse Colombo, who was able to recognize in advance the inflated "bubble" in the US real estate market, which eventually led to the global financial crisis, warned of an impending economic disaster. According to him, which led The Independent, a new crisis could be much more serious than the previous one.
According to Colombo, at present, there are also several “bubbles” on the world market that may soon burst. Meanwhile, the expert pointed out, the current situation is exacerbated by the epidemic of the coronavirus COVID-19, which went far beyond Asia, as well as the protracted recession in the global economy that began long before it.
In addition, Colombo added, another negative factor was the collapse of the OPEC+ March 6 deal and the ensuing collapse in oil prices.
US imposed sanctions on another Rosneft subsidiary
The US has included in the “black list” another subsidiary of Rosneft - TNK Trading International S.A. According to the US Treasury, Washington considers the company involved in the sale and transportation of oil from Venezuela, contrary to the sanctions regime.
TNK Trading International S.A. registered in Switzerland and controlled by Rosneft since December 2017.
Earlier in February, the U.S. imposed sanctions on Rosneft Trading, accusing Rosneft's subsidiary of selling Venezuelan oil. The Russian company rejected this version.
Market sentiment is extremely negative
The mood on the global stock and commodity markets remains extremely negative due to the rapid spread of the coronavirus COVID-19 around the world, and the markets still have room to fall, financial analysts say.
“Sentiment on global stock and commodity markets remains extremely negative. By Thursday evening even gold could not resist the fall, quotes of which fell by 4%, falling below $1,600 per ounce,” says Elena Kozhukhova, an analyst with VELES Capital Investment Group.
According to her, the European Central Bank (ECB) could not "please the bulls" yesterday, and now the exchanges will wait for the actions of governments and possible fiscal measures to support the economy."
At the same time, the head of IAC Alpari Alexander Razuvayev believes that the markets “still have a place to fall.” So, the expert points out," the value of all Russian stocks and indices is a derivative of oil prices."
“With a Brent oil price of $ 25-30, the fair level of the RTS dollar index is 600-800 points. So there is still room to fall,” the analyst warns.
Recall that the U.S. stock indicators on the basis of yesterday's trading showed a sharply negative mood. The Dow Jones Industrial Average Index lost 9.99% and reached 21,200.62 points. The value of the broad market index S&P 500 decreased by 9.51% to 2480.64 points. The high-tech NASDAQ index fell 9.43% to 7201.80 points, reports Finam.
Such a crushing fall in exchanges in one day was the second worst in U.S. history, after Black Monday 1987. Even during the Great Depression, such failures did not occur,” Prime said.
The pressure on the stock exchanges on Thursday was exerted by a statement by US President Donald Trump about the introduction of a 30-day ban on entry into the U.S. from Europe due to coronavirus from March 13. Earlier this week, the World Health Organization (WHO) announced the outbreak of the new coronavirus COVID-19 as a pandemic.
Leading stock indicators of Western Europe closed yesterday in a strong minus. The British FTSE 100 index fell 10.93% to 5234 points, the French CAC 40 - 12.28% to 4044.26 points, the German DAX index - 12.24% to 9160.7 points, the Italian FTSE MIB - 16, 62% to 14949.5 points, Spanish IBEX 35 - by 14.61% to 6350 points.
In Russia, revealed six new cases of infection with coronavirus
Six new cases of coronavirus infection have been reported in Russia.
According to RIA Novosti with reference to the operational headquarters, four cases in Moscow and one each in Kaliningrad and the Krasnodar Territory were detected per day. According to the latest data, in the world the number of cases of COVID-19 infection has reached 126, 410 cases, and 4, 635 have died. The WHO has announced the situation with the coronavirus pandemic.
How to survive quarantine due to coronavirus in Taiwan and near Moscow, are measures against the spread of a dangerous disease reliable, and how much money can be lost due to flight cancellation, said businessman Alexander Chigirkin in a Rosbalt podcast, who made a business trip to Asia.
Foreigners stopped buying tours to Russia
The Association of Russian Tour Operators (ATOR) has recorded an almost complete stoppage of sales of tours to Russia due to the spread of the coronavirus COVID-19 and related quarantine measures.
As early as February, Russia restricted air traffic to China, South Korea and Iran due to the outbreak of the coronavirus there. On March 11, communication with the cities of France, Germany, Italy and Spain was also limited.
As ATOR told Interfax, “inbound tourism tour operators report an almost complete halt to the sales of tours to Russia.”
“The reasons are the spread of coronavirus in many countries of Europe and Asia, as well as the quarantine measures taken in Russia itself. According to the estimates of the ATOR analytical service, the total value of the canceled applications for the period from March to May now is at least R500m. It is about canceling trips for about 15,000 foreign tourists,” the association said.
Recall, on March 5, the executive director of the Association of Russian Tour Operators Maya Lomidze said that because of the coronavirus in the tourism market, an unprecedented situation has emerged.
“The situation in the tourism market can be assessed as unprecedented, and for 25 years, I don’t remember the analogues with which to draw a parallel. This affects all types of tourism industry, all categories of consumers - from children's tourism to business. All spheres of the industry are hospitality, transport, tourism,” Lomidze emphasized.
At the same time, she noted that at present “there is an active and even aggressive informing of the consumer about what coronavirus is,” however, the ATOR executive director believes, “insufficiently reasoned. Lomidze then predicted that the result of this situation would be losses to the tourism industry, estimated in billions of dollars.
Prior to this, the Federal Tourism Agency (Rostourism) outlined proposals to support the Russian tourism market in the face of the difficult epidemiological situation in the world caused by the outbreak of the Chinese coronavirus COVID-19. In particular, the agency is ready to offer to transfer the deadline for the payment of contributions by tour operators to the Turpomoshchi personal liability fund from April to July, as well as to cancel contributions to the reserve fund this year. In addition, it is proposed to consider the possibility of deferring the payment of taxes on salaries to the budget. This support measure, aimed at retaining personnel in the industry, can extend not only to tour operators, but also to travel agents and hoteliers.
Putin chooses lifelong presidency
Cosmonaut Tereshkova suggested that after the adoption of the updated Constitution, anyone, specifically Vladimir Putin, could take part in the presidential elections in the Russian Federation. Vladimir Putin said in the Duma that if the Constitutional Court approves this idea, he is not against it. There is no doubt that the Court will approve and Putin will again get the right to go to the polls.
In power since 2000, Putin, 67, recalled that these changes should still be approved by the Constitutional Court and popular support in a referendum on April 22. Nevertheless, both of these steps seem to be a formality.
Immediately after the president’s speech, 380 parliamentarians voted for the document. 44 Communist deputies opposed. This amendment is based on the constitutional amendments proposed by Vladimir Putin on January 15, which are said to nullify the number of terms of the current leader. In other words, the times of the old constitution are not taken into account.
On the other hand, experts believe that the ruling elite feels the impending catastrophe in the country with their skin and, just in case, taking all the reins of government in their hands, is trying to prevent any threat from within, popular discontent, which can easily outgrow the background of the acute economic crisis into a revolution that would simply stamp out of existence the new Russian bourgeoisie, which has mastered the national economy on the feudal model of the Middle Ages.