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. Last Updated: 07/27/2016

Russia Turmoil Shakes Europe Stocks




LONDON -- Evaporating confidence in the Russian economy shook European stocks Thursday in highly volatile trade.


A plunge in Russian shares and a call by international financier George Soros for a devaluation of the Russian ruble added to the gloom in markets still reeling from thumping losses.


Stronger-than-expected U.S. retail sales figures helped limit Wall Street's losses and pulled European markets well off their lows.


But the sales data was but a small chink of sunshine on a day that saw shares in Hong Kong slide to fresh five-year lows and in Malaysia to 10-year troughs.


With a stronger yen preventing further advances by bonds and gold hitting a seven-month low, oil markets scored the most impressive gains of the day on news of cuts in sales by Saudi Arabia.


The only consolation for equity investors was that it could have been much worse. After sliding as much as 3 percent in the morning, most European indexes closed no more than 1 percent lower.


The FTSE 100 in London fell 1.15 percent to its lowest finish since late January, Frankfurt's Xetra DAX index fell 0.59 percent, while the Paris CAC-40 managed to claw its way into the black for the day, ending up 0.15 percent.


The steepest falls were shares in banks, arguably the sector with most to lose from devaluations in Asia and Russia.


"We are in a bear market and there's no end in sight," Charterhouse Tilney chief economist Richard Jeffrey said, referring to the London market.


Norwegian stocks were the worst performing in Europe, falling 1.77 percent to 14-month lows amid rising domestic interest rates and worries about oil prices.


Russia jitters put pressure on Eurobond and swap spreads, dealers said.


Traders said Eurodollar spreads had widened between an average of one to three basis points.


A better-than-expected performance on Wall Street pulled European markets out of their slump, with the Dow Industrials down about 0.3 percent as European markets closed.


Dealers said a U.S. rally Wednesday had restored some confidence on Wall Street and there were also expectations of a flight to U.S. assets from the chaos in Asian and Russian markets.


With investors already nervous about the prospect of fresh devaluations in Asia, a letter by financier George Soros to the Financial Times was all the excuse many needed to pound down shares.


The Deutsche mark weakened against the dollar on Russian worries, which typically hurts the mark because German banks are big lenders to Russia.


The dollar broke through 1.80 marks for the first time in a month before retreating to 1.7850 compared with 1.7755 on Wednesday.