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Market mood sours on Russia

Thursday, August 07, 2014 - 01:56

Russia's response to EU/U.S. sanctions is ratcheted up a notch as it announces its intention to ban Western food imports - adding to a sombre mood on Europe's markets. Also eyed: the Bank of America could face the biggest penalty seen so far for misconduct. David Pollard reports.

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Russia wants to ban all food imports from the United States. Also on the Kremlin's reverse shopping list: all fruit and vegetables from Europe. They too would be blocked from import. It's another sign of increasing tension between Russia and the West - tension that's also sinking into market sentiment. IG market analyst, Alastair McCaig. SOUNDBITE (English): IG MARKET ANALYST, ALASTAIR MCCAIG, SAYING: ''Many of these sanctions are going to be pretty double-edged. Yes, they will hurt the Russians and Russian businesses but quite frankly, they're going to hurt Europe almost as much. And then with Russia starting to throw its weight around as well with the no-fly zones arguably over Ukraine and other regions and obviously, food imports et cetera, this looks like it could embark on a bit of a tit for tat sanctions fight and Vladimir Putin's never been the one that looks to back down easily. So it doesn't look like an easy resolution to this in the short term.'' German 10-year Bund yields and 10-year UK gilt yields hit a one-year low. Russian shares have slid 20 percent over the last three weeks - they took another hit in early trading. One other loser on the day could be the Bank of America. It's reportedly in the frame for the biggest ever in a series of already mighty settlements for misconduct. Sixteen and half billion dollars expected to be paid out - to U.S. regulators. SOUNDBITE (English): IG MARKET ANALYST, ALASTAIR MCCAIG, SAYING: ''They are one by one knocking off all the culprits and imposing fines. The size of it, arguably, isn't too much of a surpass. We've seen this trend increase. It'll be disappointing for the bank, but by the same token I think the markets to an extent will be prepared for some pretty bad news and undoubtedly there will others who will be even more fearful.'' There was some cheer for banks though as Commerzbank announced a doubling of its net profit. Nestle was in demand on news of a share buyback. One other potential winner: the ECB. Recent market weakness has also pushed the euro to a nine-month low against the dollar. Easing some of the pressure, for a while at least, for another dose of euro zone liquidity.

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Market mood sours on Russia

Thursday, August 07, 2014 - 01:56