Russia’s stock markets, which had led the world with their rally since February – matching the rebound in crude prices, are now leading the worlds markets back into the land of the bear. They are now down more 20% from their yearly highs.

Tuesday saw them stand out as amongst the biggest losers in a global sell off which saw increasingly skittish investors take a World Bank warning of deeper than expected downturns in most economies, as confirmation it was time to sell

Trust Bank Chief Economist, Evgeny Nadorshin, believes that after the strong rally from March to May, any opportunity to lock in profits was taken, with the markets having got too far ahead of the economic reality.

“The arrival of no good news made investors think that they had been initially overoptimistic and they did the thing about which people were talking the whole May and at least till the end of this spring. So, they sold, they sold as much as they could.”

The slump in Russian stocks also came as crude prices, which have been notably buoyant despite fundamentals, headed below $70/bbl. Here too there is increasing suspicion that the price has gone well beyond anything supportable on a supply demand basis. Jorge Montepeque, Global Director of Market Reporting at energy analysts, Platts, says demand could be further undermined over the longer term with the scale of U.S. government borrowings likely to lead to higher interest rates and subdued demand in the world’s largest oil consumer.

“Oil prices are under pressure because demand is not very healthy, and at the same time the U.S. Government has a lot of debt that they need to sell. As they sell this debt, the interest rate will increase as investor in U.S. debt wants to get a fair return. So, as interest rates start creeping up, demand is going to be affected further.”

The moves in crude over recent weeks have reflected the return of interest in the U.S. dollar, and have replicated falls in the prices of most other commodities. While the longer term for the U.S. currency remains weak, the demand for the commodities Russia produces is also less than rosy, with the domestic economy still to pull out of near free fall. Against this background the manic depressive nature of the Russian stockmarkets is set for further turbulence for some time yet.