Europe chem stocks down in line with wider markets on oil price fall

LONDON (ICIS)–Most European chemical companies saw their share prices fall on Wednesday, in line with wider markets, on the back of a continuing weakness in the Russian rouble (Rb) and the free-fall in the price of crude oil.

Although losses were contained to around 1.5% falls, they were widespread across the board. At 13.30 GMT, Germany’s BASF saw its shares fall 1.48%, while Bayer saw a 1.16% decline in its share price.

At the same time, shares in UK chemical firm Johnson Matthey fell 1.33%, while Belgium’s Solvay saw a decline 1.50% and the Netherlands’ AkzoNobel saw a decrease of 1.53% in its stock value.

The falls are in line with the decreases being registered across European bourses, with shares in Germany’s main index DAX at 13.33 GMT falling 0.87% from the previous close, while in France’s CAC 40 shares decreased 0.75% and the UK’s FTSE 100 saw losses of 0.83%. 

Italy’s FTSE MIB, meanwhile, saw a fall of 1.83% and Spain’s Ibex 35 recorded a 1.33% decine in its shares.

Analysts attributed the widespread losses to the volatility of the rouble, which has been falling in tandem with the price of oil, Russia’s main export and from which several state expenditures depend.

The Russian central bank decided in the early hours of Tuesday to raise interest rates, aiming to contain the malaise. Investors woke up to a historic single-day rise from 10.5% to 17%, which temporarily contained the rouble’s losses.

On Wednesday at 13:40 GMT, the exchange rate was $1:Rb66, compared with Tuesday when at its lowest intraday trading the rate stood at $1:Rb79.

The free-fall in the crude price is the main explanation for Russia’s economic troubles, although analysts also point out western sanctions are starting to take effect.

Russian president Vladimir Putin has based his presidency on the good economic performance brought by high oil prices, but that structure seems to be in danger now as oil producing countries cartel, OPEC, has decided not to cut production so prices could gain some traction.

Moreover, the fall in the Russian rouble reminds investors of the crisis the country experienced in 1998 and which quickly sparked into other emerging markets. On the back of a weak performance during 2014 in those markets, the world is now holding its breath to see how far, and for how long, the Russian crisis will continue.