Rouble jumps on Russia rate hike, oil pressured


Sliding oil prices and a downbeat China factory survey weighed on Asian shares on Tuesday, while the rouble jumped against the dollar after Russia sharply increased its benchmark interest rate in a desperate bid to halt a collapse in its currency.
Financial spreadbetters did not expect Asia’s gloom to taint the beginning of European trade, with Britain’s FTSE 100 seen opening 12 to 20 points higher, or up 0.3 percent; Germany’s DAX to open 23 to 41 points higher, or up 0.4 percent; and France’s CAC 40 to open 12 to 17 points higher, or up 0.4 percent.
Investors will look to a spate of European economic releases, including flash manufacturing and services PMIs and ZEW economic sentiment readings for Germany and the region as well as trade data, particularly after activity in China’s factory sector shrank in December for the first time in seven months as new orders declined.
“While some would have hoped to see disappointing China data result in growing calls for stimulus, this has not been the case today and we’ve actually seen investor concerns heighten,” Melbourne-based IG Markets strategist Stan Shamu said in a note. “China activity generally ramps up heading into the back end of the year but it doesn’t seem like this will be the case this time.”

MSCI’s broadest index of Asia-Pacific shares outside Japan extended losses and was down 0.8 percent, after major indexes all posted losses on Wall Street on Monday. Japan’s Nikkei stock average skidded 2 percent.
“Concerns about the Russian economy and a slowdown in the Chinese economy are hurting the mood, and the oil price collapse poses a threat to U.S. shale gas production,” said Kyoya Okazawa, head of global equities at BNP Paribas.
Emerging markets remained under pressure from Asia to Latin America as investors dumped riskier assets, with the Indonesian rupiah skidding to a fresh 16-year low.
The Russian central bank early on Tuesday raised its key interest rate to 17 percent from 10.5 percent, in a move it said was aimed at curbing increased devaluation and inflationary risks.
Oil and gas are Russia’s chief source of export revenue. Tougher U.S. sanctions on Moscow, which were set out in a bill passed by U.S. Congress on Friday, have also added to Russia’s economic woes.
The rouble weakened beyond 60 to the dollar, after rising above 67.00 at one point on Monday when oil prices fell sharply. It last traded at 61.10 to the dollar.
Crude prices remained under pressure on Tuesday after OPEC once again said it will not cut oil output despite fears of massive oversupply, and a UAE official nixed holding an emergency meeting of the producer group to support prices.
UAE Oil Minister Suhail Bin Mohammed al-Mazroui said there was no need for OPEC to meet, reinforcing the idea that major Gulf producers are ready to wait out lower prices.
U.S. crude was down 0.7 percent in Asian trade at $55.53 a barrel, after touching a fresh May 2009 low of $55.02 on Monday. Brent shed about 0.8 percent to $60.56, after dropping as low as $60.20 on Monday, its lowest since July 2009.
Risk aversion helped pushed the dollar lower against the safe-haven yen. The dollar was down about 0.4 percent on the day at 117.28 yen, approaching a low of 117.44 yen touched last Thursday, and moving further away from its seven-year high of 121.86 yen set on Dec. 8.
The euro edged up about 0.1 percent against the dollar to $1.2453.
Spot gold added 0.3 percent to $1,196.20 an ounce after falling more than 2 percent on Monday, its deepest slide in over a year following the slump in oil prices.
Investors are now waiting to see if the U.S. Federal Reserve’s final meeting of 2014 on Tuesday and Wednesday results in a more hawkish tone, with a statement and forecasts expected on Wednesday at 2:00 p.m. EST (1900 GMT), followed by Fed chief Janet Yellen’s press conference half an hour later.
U.S. data on Tuesday underscored the economy’s underlying strength, as manufacturing output recorded its largest increase in nine months in November as production expanded across the board. However, the New York Federal Reserve’s gauge of manufacturing turned negative in December for the first time in almost two years.


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