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Oil aftershock shakes Naira, Russian Ruble

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LAGOS — Oil-rich emerging markets were battered as crude prices plunged again and more weak data came out of China, yesterday.

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Russia’s ruble tumbled more than three per cent to a new record low and Nigeria’s naira was reeling again less than a week after it was devalued to try to stem its woes.

There was little sign the pressure was about to ease either as Brent crude fell more than $2 a barrel to a five-year low as its worst run since the 2008 financial crisis continued.

As the ruble slumped, Russia’s dollar-based RTS stock index dropped four per cent to a five-year low, leading the charge down in a 1.3 percent slide in global emerging market stocks.

Other oil-heavy markets also suffered. Nigeria’s naira dropped two per cent to a new record low against the dollar. Malaysia’s ringgit fell 2.4 per cent, headed for its biggest two-day slide since the 1997-98 Asian financial crisis.

Plunging prices for oil and other commodities raised fears of deflation, especially in the euro zone and Japan, and the prospect of looser monetary policy pushed the yen to a seven-year low against the dollar.

The yen took another brief hit after Moody’s Investors Service cut Japan’s credit rating.

“Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices,” said Neil Williams, chief economist at fund manager Hermes in London.

World oil prices are down 40 percent since June, largely on abundant supply. OPEC last week declined to cut production to raise prices. Brent crude fell as low as $67.53, its lowest since October 2009, before picking up to $69.80.

“The market is still very much in panic mode,” said Energy Aspects’ chief oil analyst Amrita Sen. Chinese purchasing managers (PMI) data showed manufacturing slowed in November, suggesting the world’s second biggest economy was still losing momentum. Factory activity also slowed in France and Germany. The FTSEurofirst 300 index fell 0.5 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2 percent, hitting six-week lows. Emerging market shares tracked by MSCI fell 1.5 per cent.

 

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