Scramble for safety as rouble, oil sink

By Patrick Graham

LONDON (Reuters) - Oil's plunge below $60 and the failure of Russia's huge emergency rate hike to stabilise the rouble jolted global markets on Tuesday, adding to the growing sense of crisis in a volatile end to 2014.

The rouble sank to more than 70 per dollar, down 10 percent on the day, despite Russia's central bank ramping up interest rates overnight to 17 percent from 11.5 percent. Moscow's dollar-based stock exchange dived 15 percent.

In a morning of sharp swings across Europe and the Middle East, Dubai's market, which is heavily exposed to oil, fell 7 percent while the Norwegian crown, another oil currency, sank as much as 5 percent.

U.S. shares fell a third of a percent in early trade.

After a bumper few years driven by huge amounts of cash pumped into the financial sector by the world's central banks, the struggle for growth in Europe and Japan and a slowdown in China has left investors deeply concerned over the shape of things to come.

The result has been a surge in stock market volatility to levels not seen in two years, and a flood of money out of emerging markets and into traditional safe havens like the yen.

Wall Street's favourite fear gauge, the CBOE Volatility index, rose almost 7 percent.

""We always knew that the dollar's rise would send a shock through emerging markets, and we can see that is happening," said Neil Mellor, a currency strategist with Bank of New York Mellon in London.

Yields on 10-year German government bonds - one of the last refuges for investors in times of stress - sank to record lows while prices of U.S. Treasuries also rose.

Russia's problems have been seen as stemming chiefly from the fall in the price of oil and the increasingly tough sanctions imposed on it by the U.S. and other trading partners in response to its actions in Ukraine.

But Russian companies also face a $35 billion spike in corporate debt repayments they must make in dollars in the fourth quarter, made all the more costly by the broader rise of the dollar this year. http://link.reuters.com/nuk43w

The bigger worry, underlined by the Bank of International Settlements earlier this month, is that the dollar's strength may lead to such tensions over corporate finances being repeated across the developing world.

GROWTH CONCERNS

The turmoil adds to the case for U.S. Federal Reserve chief Janet Yellen keeping her outlook for monetary policy very loose - and by implication official returns on the dollar lower for longer - at a meeting ending on Wednesday.

Concerns over growth were also amplified by a downbeat survey of manufacturing in China, which weighed on Asian shares. Similar surveys in the euro zone, allied to better trade numbers, offered some support.

U.S. housing starts and permits fell in November, but remained at levels consistent with a gradually improving housing market.

"The market is reflecting a global macro concern more than anything," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

"The trigger point is commodities, in this case oil, in a free fall, forcing people to completely avoid stocks. Until we get some stabilization in energy prices I think we're going to continue to see that trade."

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8 percent as investors dumped riskier assets, and the Indonesian rupiah skidded to a 16-year low. Japan's Nikkei stock average fell 2 percent.

Crude prices fell again, by nearly 3 percent, putting Brent crude under $60 for the first time in more than five years.

UAE Oil Minister Suhail Bin Mohammed al-Mazroui said there was no need for OPEC to hold an emergency meeting, reinforcing the idea that major Gulf producers are ready to wait out lower prices.

(Additional reporting by John Geddie, Anirban Nag in London, and Rodrigo Campos in New York; Editing by Hugh Lawson)