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Recent developments in Russia’s stock market have raised eyebrows as it recorded its largest drop in three years. This downturn follows statements from a senior diplomat indicating that efforts to secure peace in Ukraine have largely stagnated, leaving investors unsettled.
The Moscow Exchange (MOEX) Index, which provides insights into the performance of 40 of the nation’s leading publicly traded companies, plummeted by 4.05%, settling at 2,563.3 points.
This marks the lowest point since December 2024 and represents the steepest single-day decline since September 2022.
Impact on major companies
Significant losses were observed across various sectors, with notable declines in the shares of major corporations. Gazprom saw a decrease of 4.1%, while Sberbank experienced a 4.9% drop. Other major players like VTB and Rosneft followed suit with declines of 4.7% and 2.5%, respectively.
Both Severstal and Aeroflot suffered nearly 5% losses. Additionally, companies such as Rostelecom, Inter RAO, and Magnitogorsk Iron & Steel Works saw their stocks decline by more than 5%. The most significant drop was recorded by Mechel, with its shares plummeting by 6.7%.
Investor sentiment shifts
The decline in the stock market can be attributed to escalating geopolitical tensions, according to Yaroslav Kabakov, strategy director at Finam. He noted that the market’s reaction intensified following remarks from Deputy Foreign Minister Sergei Ryabkov, who stated that the positive momentum towards a potential peace agreement had “been exhausted” after a notable meeting between President Vladimir Putin and former President Donald Trump.
Ryabkov further articulated that the existing framework of Moscow’s relations with Washington was in a state of disintegration, adding that the Kremlin perceives no movement from the United States towards repairing these diplomatic ties. This sentiment was echoed by President Putin, who reaffirmed the military objectives during a meeting with senior military officials, indicating that the goals of the ongoing operation remain unchanged.
Economic implications
As the MOEX index continues to decline for five consecutive weeks, the cumulative loss since February has exceeded 22%, translating into a staggering 1.3 trillion rubles (approximately $15.9 billion) in market capitalization. Analysts from PSB Bank attribute this decline to a shift in investor sentiment, moving from a phase of inflated expectations to a wave of pessimism.
This persistent downward trend in the stock market is often a harbinger of deeper economic issues, warns Andrei Khokhrin, CEO of Ivolga Capital. The Russian economy, which had been buoyed by substantial military expenditures in recent years, is now showing signs of stagnation. For instance, the GDP growth has nearly come to a halt, with only a 0.4% increase year-on-year noted for July and August.
Declines in civilian industries
Civilian sectors are also experiencing a downturn, with production in various industries facing significant setbacks. For example, output in the clothing sector has decreased by 9.1%, while furniture production has reported a 12.7% drop. Likewise, food production is down by 2.1%, and the metals sector has seen an 8.4% reduction in output. These figures highlight the broadening scope of economic challenges facing the nation.
The World Bank has recently revised its growth forecasts for the Russian economy, projecting an increase of merely 0.9% in 2025, followed by 0.8% in 2026 and 1% in 2027. Such projections indicate a long road ahead for recovery and stabilization.