Market recovers as Russia raises $1bn

RUSSIA'S battered stock market rose for the second day running yesterday as investors, soothed by rumours of an international financial rescue package, bought almost $1bn of government debt

The cash raised from the successful debt issue reduced fears that the Russian government would default on debt payments. It also eased pressure on the rouble.

So confident was the prime minister, Sergei Kiriyenko, that he had managed to survive last week's life-and-death test of his new government that he left for Paris for his first trip overseas. "I am absolutely certain that the situation is under control," he said before his departure.

Confidence is growing that Russia has weathered the worst of the storm, which last week sent shares plunging and saw the Central Bank scrambling to defend the currency, buying up roubles and tripling interest rates to 150 per cent.

Although the Central Bank's reserves have been depleted by its battle for the rouble, it has emphasised that has plenty left to prevent a run on the currency.

The crisis has turned Russia's stock market into the world's worst performer this year, slicing its value in half. This week, however, the market has staged a partial recovery. Stocks rose by 12 per cent on Tuesday, wiping out Monday's 10 per cent drop. Yesterday, Russia's benchmark RTS stock index closed at 209.07, up 8.5 per cent.

Intense speculation about a possible $10bn loan package was the main reason for renewed investor optimism.

Finance officials from the Group of Seven industrialised nations (G7) are to meet in Paris next week to discuss Russia's woes, which have been blamed on a combination of factors, including the Asian crisis, low oil prices and poor tax collection.

Lawrence Summers, deputy treasury secretary, is expected to represent the US at the meeting, and deputy finance ministers are expected to represent Japan. France and the UK are thought likely to send civil servants rather than ministers to the meeting.

Rumours have swept the foreign exchanges that Russia will ask the G7 nations for a rescue package to stabilise the rouble, although Russia's finance minister, Mikhail Zadornov, yesterday announced that it would not be making a formal request to G7 for aid "as a matter of principle".

Earlier this week, Robert Rubin, US Treasury Secretary, said the G7, the IMF and Russia had yet to agree on whether a financial rescue package was necessary.

Financial support is not the only way the G7 could help ease Russia's pain. Verbal support from the seven countries could also encourage the IMF to release its next tranche of aid to Moscow, which is due at the end of June.

Analysts were yesterday warning that Russia's latest debt sale could lead to more difficulties in the future. Eric Kraus, chief strategist at Regent European Securities said: "By raising money in this way they are increasing the amount of refinancing that will be necessary next year."

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Sheridan Maine: Financial Accountant

£150 - £190 Daily Rate: Sheridan Maine: One of London's leading water supplier...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor