Emerging Europe

Russian shares dip as Ukraine ceasefire expiry nears

An employee looks at a stock price index graph showing plunging stock prices on an electronic information screen at the headquarters of the Micex-RTS Moscow Exchange.
Andrey Rudakov | Bloomberg | Getty Images

Russian shares fell on Monday and the rouble weakened as a ceasefire between Ukrainian troops and pro-Russian separatists in eastern Ukraine was set to expire and as Russian exporters stopped buying roubles to pay monthly taxes.

"Tension in relations between pro-Ukrainian forces and the separatists remains despite the ceasefire - each side is accusing the other of breaking the agreement," Mark Bradford, an analyst at BCS brokerage, wrote in a note.

Read MoreBeware the risks of severe sanctions on Russia

Fighting flared over the weekend in eastern Ukraine, with both sides saying the other was using artillery around the flashpoint city of Slaviansk, despite a formal ceasefire due to end at 10 p.m. on Monday (1900 GMT).

Persistent violence has increased pressure on new Ukrainian President Petro Poroshenko, who promised to end the crisis in the east in a matter of weeks, to step up what he calls an anti-terrorism operation against the rebels.

The European Union has said it could impose more penalties on Moscow on top of existing asset freezes and visa bans unless pro-Russian rebels act to wind down the crisis in the east of the country by Monday.

"A swift resolution of the conflict is not expected. This will continue to create a negative background for Russian assets, although threats of sanctions continue to be ignored by the market as before," ING economist Dmitry Polevoy said in a note.

Russian share indexes hit multi-month highs last week after President Vladimir Putin asked parliament to revoke a resolution that granted him the right to deploy Russian troops in Ukraine.

Read MoreRussia has sent tanks to Ukraine rebels, US says

But sentiment has soured as violence continues amid Western threats of new sanctions against Russia, which U.S. officials say may target the finance, technology and defence sectors.

The rouble weakened against both the dollar and the euro on Monday, also weighed down by the end of the monthly tax period, which traditionally supports the rouble as the country's major commodity exporters have to convert their foreign currency earnings into roubles to pay to the state budget.

The Russian currency was down 0.44 percent at 33.88 against the dollar and 0.38 percent weaker at 46.24 against the euro.

It had slipped 0.44 percent to 39.45 against the dollar-euro basket the central bank uses to guide the rouble's nominal exchange rate.

Read MoreUkraine: Why markets should (still) be worried

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