By Sujata Rao and Carolyn Cohn
LONDON, March 4 Russian equities, bonds and the
rouble soared on Tuesday and Ukraine's assets rallied after
Russian moves that investors took as a sign of an easing in
Russian President Vladimir Putin said Moscow would only use
force in Ukraine "as a last resort" after ordering troops
involved in a military exercise in western Russia back to base.
"There has been a visible decrease in geopolitical tensions
in the region and the market has taken the news very
positively," said Tatiana Orlova, a strategist at RBS. "The
biggest concern has been the possibility of the conflict
spilling into eastern Ukraine."
Putin skirted questions about Russian servicemen taking
control of the Crimea region, saying armed men who seized
buildings were local forces.
But in a further positive development, Russia's top gas
producer Gazprom offered a $2-3 billion loan to Ukraine to repay
its gas debt to the Russian firm.
Russian and Ukrainian dollar bonds rose by as much as 6
cents on the dollar, and Russian stocks climbed 6.5
percent, after plunging 12 percent on Monday.
Average sovereign Russian bond yield premiums over U.S.
Treasuries fell 2 percentage points on the EMBI Global index.
Russian debt insurance costs fell 24 basis points to 208
basis points, according to Markit, after surging to nine-month
highs on Monday. Ukraine's CDS tumbled 108 bps to 1110 bps and
the hryvnia rose 4 percent.
The rouble rose 1 percent after getting a boost from
a 150 bps emergency rate rise on Monday, a higher pace of
central bank interventions and news the finance ministry had
suspended dollar purchases for a wealth fund.
UBS strategist Manik Narain said the central bank had made
it tougher to run short-rouble positions by upping implied
12-month rouble yields to 8 percent, higher than the Indian
rupee and only slightly below the Brazilian real's 9 percent.
"One reason why the rouble has been under so much pressure
is that at a time when so many emerging central banks were
moving to a strong defence of their currencies, Russia was
coming through as a laissez-faire central bank," Narain said.
"Now the central bank is sending the message that they have
reached the limit and will push back against speculation in the
In central Europe, the zloty and the forint rose nearly 1
percent to the euro . Both currencies got
help from the previous session's robust PMI data, which had been
overshadowed by the events in Ukraine.
The Budapest stock market rose 2.9 percent and shares
in Ukraine-exposed bank OTP jumped more than 5 percent
after sliding 10 percent on Monday.
The Turkish lira also rose nearly 1 percent and
Turkish stocks gained more than 2 percent, despite an
ongoing corruption scandal.
President Abdullah Gul ordered state auditors on Tuesday to
assess Turkey's ability to combat corruption, including in the
construction sector, amid a graft investigation that has
implicated senior elected officials.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )