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. Last Updated: 07/27/2016

Value of Russian Debt Plunges, Markets Jittery

The value of the former Soviet Union's debt fell sharply Friday and world stock markets remained jittery as fears of higher interest rates mixed with the uncertainty over Russia's political situation to push shares down.


The Russian debt, traded on secondary markets in London, dropped to 28 cents on the dollar, about where it was in July when a tentative agreement was reached with commercial creditors to reschedule the $26 billion debt.


It had been trading at around 32 on Thursday. One London trader said higher interest rates shook the highly leveraged secondary debt market and forced a collapse in emerging markets in general.


Fears of further rises in U.S. interest rates took their toll in Asia and Europe on Friday, pushing most markets lower.


In the United States, the Dow Jones had fallen by six points by late morning Friday, after a dramatic 52 point sell-off on Thursday.


German and French stock markets lost more ground Friday after the previous day's sell-off but London returned cautiously to the plus column.


By the close of trading the FTSE-100 index was up 13.7 points after its slide of 74.4 points on Thursday, which was mainly due to a slump in futures and bonds on worries about higher interest rates, exacerbated by the uncertain outlook in Russia.


"It is still very, very nervous, very fragile," one senior trader said. "The futures are driving the market."


Hong Kong stocks plunged 3.18 percent after remarks by U.S. Federal Reserve Chairman Alan Greenspan that the central bank may again raise interest rates sent shares in the United States and Europe tumbling.


The Hang Seng Index ended 331.77 points down at 10,100.25, but was off a morning low of 9,892.07 following the release of higher than expected profits by Hongkong and China Gas.


Brokers said investors were concerned about the continuing Sino-British row over democratic reform in Hong Kong but this was a secondary factor.


Of the major markets, only Tokyo managed to shrug off the blues to end 37.90 points higher at 19,803.38.


Wall Street stocks and bonds plunged Thursday on investors fears of the jump in long-term interest rates to eight-month highs could stifle the economic recovery.


The Fed boosted short-term rates on Feb. 4 for the first time in five years in a move to contain inflationary fears, leading to a nearly 100 point fall in stocks.


Also, a tense political situation in Russia that sent European stock markets into a retreat, weighed in, dealers said. Rumors of a new coup roiled the European markets after Russia's parliament amnestied leaders of the anti-Yeltsin uprising.


Meanwhile, gold and silver prices moved ahead Friday after Russian officials denied the country's central bank had either made gold sales this year or planned to make large volume bullion sales. (Reuters, MT)