By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Russian equities tumbled Tuesday, prompting the suspension of trading on Moscow's two stock exchanges, as falling oil prices and escalating concerns about the economic deterioration in Eastern Europe encouraged investors to sell local assets.
The ruble-denominated Micex stock index and dollar-denominated RTS stock index both plunged 9.4%. The sell-off prompted the two stock exchanges to suspended trading for one hour starting at 4:05 p.m. Moscow time.
In New York, the Market Vectors Russia ETF /zigman2/quotes/200464876/composite RSX 0.00% , which tracks the Russian stock markets, tumbled 16%.
The Russian markets joined a broad sell-off in Eastern European assets sparked by a report from Moody's Investors Service, which expressed concern about Western European banks that are supporting subsidiaries in Eastern Europe.
The ratings agency said that the deteriorating financial strength of Eastern European subsidiaries has a negative spillover effect on their Western European parents. Read more.
"Russia is off on emerging markets in general as well as minor disappointments -- large wage arrears, concerns over oil, government cutting back Sochi spending, weak ruble," said James Fenkner, principal and portfolio manager of Red Star Asset Management, a hedge fund that invests primarily in Russian assets.
"Going forward, a bounce is likely this week, but the real recovery will only occur after the ruble has bottomed out," Fenkner said in emailed comments.
Oil prices tumbled below $35 a barrel, weighing heavily on the Russian markets, which are dominated by oil and gas stocks.
The RTS Oil and Gas index fell 10.3%, as shares of Rosneft /zigman2/quotes/210467969/delayed UK:ROSN 0.00% , Gazprom /zigman2/quotes/210269676/delayed OGZPY -46.60% and Lukoil /zigman2/quotes/200301672/delayed LUKOY -42.00% tumbled.
Financial stocks also took a beating, with shares of state-controlled Sberbank and VTB Bank falling sharply.
Norilsk said Monday that it will suspend its Black Swan and Lake Johnston nickel operations in Western Australia because of "the prevailing economic climate and its impact on the nickel price."
"These Western Australian assets are located in prime nickel producing regions and have the potential for further exploration," Norilsk said in a statement. "However, market and other conditions have left the Australian business unsustainable given current metal prices."
Norilsk is Russia's largest diversified mining and metals company; it's also the world's biggest producer of nickel and palladium.
Russia was the worst performing major emerging market in 2008, when the MSCI Russia index tumbled 74%. Investors have pulled billions of dollars out of Russia on concerns over falling commodity prices, the deteriorating economic outlook, pressure on the ruble and domestic political risk.