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Politics : Idea Of The Day
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To: IQBAL LATIF who wrote (19276)8/13/1998 8:24:00 AM
From: IQBAL LATIF  Read Replies (3) of 50167
 
Since this morning there has been severe pressure on the DAX, CAC-40 and FTSE due to an article in the paper which implies a Russian devaluation. The result has been flight to capital, bonds higher and also dollar is well bid and sterling gained against the Mark; the Mark has been under pressure.

It looks as if this news will lead to a much softer opening on DOW than we anticipated, there are still a couple of hours to go before the market opens, but we have news that Russian Central Bank says the Rouble devaluation will not take place and as such this news will be just an effort planted to break hedged supports. So far the timing of the news has been strange but it has a certain element of seriousness because I have always considered that Russia does not have strategic implications of Continental Europe.
A chaos in Russia, unlike chaos in Asia, has got far more strategic implications. In my model I give a lot more weight to Russia than even China because if Europe destabilizes a forward-growth seriously gets affected in the Eastern flank of Europe which depends on Russia but Continental and East European markets were initially down much more but still soft.

In my opinion this is a long-term issue which needs to be very carefully watched. Like the Yen weakness, Russian default is a major issue for continental Europe which has the potential of taking markets through major supports.

(Typed as dictated by Mr. Latif; apologies for any errors in text - Samira)
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