Russia's stock markets extended their losses Tuesday on the back of a dismal trading session in the United States as the Standard & Poors ratings agency revised its long-term outlook on seven Russian banks over liquidity concerns.
The MICEX, the largest Russian index, dropped 5 percent to 1,050.5 points as of 1.50 p.m. (0950 GMT), while the dollar-denominated RTS shed 3.5 percent to fall to 1,263.6 points. The market fall came despite government efforts to inject money into the financial system and buy shares in some companies.
As oil spiked to a recent high of US$120.9 per barrel, some U.S. politicians criticized their government's massive US$700 billion rescue plan for banks. Concerns over the dissent drove the U.S. S&P 500 index down by nearly 4 percent.
Shares also fared badly in Asia.
"The contagion will be felt in all global markets again today," wrote analysts from UralSib in a note to investors. "Investors in Russia will not escape the hangover effect today, albeit with the added complication of confusing moves in the oil price."
Russia is the world's second-largest oil producer after Saudi Arabia, and the No. 1 natural gas producer. During Vladimir Putin's eight-year presidency, many Russians benefited from the boom in world oil prices and stronger growth in the country's oil-fueled economy.
The falling stocks coincided with an announcement from Standard & Poor's ratings agency, which said Tuesday it had revised the long-term outlook on seven Russian banks - including billionaire Oleg Deripaska's Soyuz Bank - to stable from positive. The ratings agency cited concerns over their liquidity situation and their ability to refinance and attract loans.
Russia's MICEX index plunged 25 percent in just three days last week after the most turbulent trading period seen in a decade. The fall was triggered by a falling oil price and a wave of margin calls, which prompted forced selling.
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