Russia’s main stock market index fell to a two-month low on Tuesday in reaction to the country’s emergency midnight rate rise, with energy and financial stocks leading broad and deep losses.

The Micex index fell 3.5 per cent to 1,832.09, its lowest level since October 27, with oil stocks standing out amid the selling. Bashneft, one of Russia’s biggest oil refiners, fell 17.8 per cent to Rbs1,171.0. Its peer Surgutneftegas was not far behind, down 17.6 per cent at Rbs26.72.

“Russia’s 6.5 per cent hike in interest rates to 17 per cent is a do-or-die move,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

“Individual [global oil] companies have now started to talk about how uneconomic investment in new projects might be with oil prices so low . . . The key question for investors is how long they will have to wait for a lack of investment in the sector to feed through into output constraints or at what price oil becomes sufficiently attractive to stimulate demand?”

Even RusHydro, the hydro electricity producer and dam operator, was not immune from the sell-off, falling 9 per cent to Rbs0.4.

Banks were also under heavy pressure. Bank St Petersburg fell 17.4 per cent to Rbs26.0 and Sberbank fell 7.3 per cent to Rbs43.4.

M.Video, Russia’s biggest electronics retailer, made the biggest single loss as the country’s economic travails left imports looking expensive and consumers’ spending power curtailed. The stock, the only of its kind on the index, lost 45.7 per cent to Rbs140.2.

There was wider international reaction on European stock markets, where companies directly exposed to Russia made some of the biggest losses.

Austria’s Raiffeisen Bank, which is active across eastern Europe and has major operations in Russia and Ukraine, was the biggest single faller on the FTSE Eurofirst 300. The stock dropped 7.9 per cent to €11.7.

Carlsberg, one of the biggest brewers in Russia, lost 3.8 per cent to €464. Metro, the German retailer with outlets in the country, fell 3.6 per cent to €22.5.

Evraz, Russia’s biggest steelmaker which is listed in London, fell 3.3 per cent to 116.4p, one of the biggest fallers on the FTSE 250. ITE, the conference organiser active in Russian markets, lost 2.6 per cent to 132.2p.

Peter Rosenstreich, head of market strategy at Swissquote, said: “There is now an increasing probability that Russia will dip into recession, making any long-Russia trading extremely risky.”

Russia’s borrowing costs jumped. Its 10-year local bond yield climbed by more than 2 percentage points to 15.36 per cent, the highest since 2007. Its international, dollar-denominated 10-year bond yield strode 36 basis points higher to 7.55 per cent.

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