LONDON: Russia's rouble fell 2.5 percent on Monday as oil prices resumed their downward spiral and the risk of more western sanctions grew, while Greece's election outcome subdued central European markets.
While the rouble slipped to 10-day lows, dollar-denominated Moscow stocks fell 4 percent and Russia's $1.5 billion dollar bond maturing 2043 fell nearly 2 cents to trade at 85.8 cents in the dollar.
U.S. President Barack Obama, reacting to renewed violence in eastern Ukraine, said Washington was considering all options short of military action to isolate Russia. The European Union has called its member states' foreign ministers to an emergency meeting.
"(Russian) markets are down as oil prices have fallen back and there has been news about the escalating crisis in eastern Ukraine which the market had overlooked in recent days," said Bernd Berg, strategist at Societe Generale in London.
Oil prices slid more than 1 percent after the victory of leftist party Syriza in Greece and the euro fell to 11-year lows against the dollar. Syriza aims to overturn much of the austerity imposed as a condition of bailouts in 2010, prompting fears of a new bout of financial instability in Europe.
Shares in Greece -- which MSCI included in its emerging markets index in 2013 -- initially fell 5.2 percent, led by banking stocks, but later trimmed losses in volatile trade .
Anxiety spilled over into central Europe with Budapest down 1 percent and Warsaw off 0.6 percent.
"We see some initial nervousness after the Greek outcome but a Syriza win was mainly priced in so the main focus in emerging markets is on the upcoming U.S. Federal Reserve meeting and policy decisions in Hungary and Russia. We believe the market will quickly get over this and look at the Fed," Societe Generale's Berg said.
He said he was "constructive" on Hungarian and Polish local bonds as pressure grows on central banks in both countries to cut interest rates. The forint fell 0.7 percent against the euro before Tuesday's central bank meeting that is expected to leave rates on hold but could send a dovish signal.
Most emerging currencies fell versus the firm dollar with the lira and rand down 0.4 and 0.7 percent respectively . Weaker oil and Boko Haram violence continued to knock Nigeria's currency, which fell 1 percent and revisited record lows reached last week.
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