London: Fears of a full-blown crisis in Russia and oil’s continued slide pushed investors to seek safety on Wednesday, buying core bonds and selling stocks while the rouble failed to halt its prolonged tumble.

Investors were also looking ahead to the US. Federal Reserve’s final statement of 2014, due at 1900 GMT. Analysts expect it to remove language pledging to wait a “considerable time” before raising US interest rates, even as Russia’s spiralling currency crisis adds to the volatile environment.

US equity futures were up 0.8 per cent, pointing to a higher open for Wall Street ahead of the Fed statement, while the dollar edged up, recovering ground against the yen after data showed Japanese exports rose less-than-expected in November.

The global economy is ending the year in a fragile state and concerns over whether disinflation will morph into deflation have spread worldwide.

One of the European Central Bank’s favoured measures of longer-term inflation expectations fell below 1.60 per cent for the first time, after data confirmed falling prices of fuel and heating oil helped keep Eurozone inflation low in November.

While there appeared to be some initial respite for the Russian rouble on Wednesday after the finance ministry said it had begun selling foreign currency, the rebound was short-lived and the currency was down 1.3 per cent against the dollar and 0.2 per cent down against the euro.

“It’s fair to say that we are to a large degree on hold ...until we get a clear idea about what the Fed is actually going to do,” said Simon Derrick, chief currency strategist at Bank of New York Mellon in London. “That matters ... most pertinently because of what it means for the oil price.” If a change in the Fed’s language prompts a surge in the dollar, oil prices may decline, potentially feeding through into more turmoil across markets, he said.

Oil prices held near multi-year lows of around $60 a barrel, with Brent crude down 60 cents to $59.41. Although oil’s slide this year was triggered primarily by a supply glut, concerns about cooling demand have also weighed on prices and hit financial markets in recent weeks.

The rouble’s collapse has prompted many funds to bail out of emerging assets, taking MSCI’s emerging equity index to new 17-month lows while emerging dollar bonds’ average spread over US. Treasuries stood at new 5-1/2 year highs of 474 basis points.

The Russian economy remains in the grip of a “perfect storm” of low oil prices, looming recession and Western sanctions over the Ukraine crisis.

Russian shares were mixed with the dollar-denominated RTS index up 6.5 per cent — the first daily gains after a nine-day losing streak — while the rouble-based peer MICEX traded 0.6 per cent lower.

Markets were also focusing on Greece, which holds the first of three potential rounds of a presidential vote later in the day that will determine whether the country is forced into snap elections and a new period of political turmoil.

Greece’s benchmark equity index was up 3 per cent, but analysts said this was down to a technical recovery after the index fell 20 per cent last week. Any fallout for the Eurozone from Greek turmoil is seen as more political than financial, due largely to measures taken during the Eurozone debt crisis.

Stocks

At 1148 GMT, the pan-European FTSEurofirst 300 equity index

was 0.6 per cent lower and the MSCI All-Country World index was down 0.3 per cent near mid-October levels.

Stocks exposed to Russia and Eastern Europe have taken a big hit as investors assess the possibility of Russian capital controls or write downs. They include Austria’s Raiffeisen Bank, which hit a new all-time low on Wednesday; Reuters reported it was looking to sell its Polish unit, according to sources.

“The attack this week on the rouble has been quite violent, and the market is now pricing in a recession in Russia next year,” said Arnaud Scarpaci, fund manager at Montaigne Capital.

“A lot of European companies exposed to Russia are under pressure. It’s better to avoid names such as Metro, Nokian and Societe Generale, at least until things stabilise in Russia.” Energy shares outperformed, however, as some investors felt that the recent sell-off had gone too far and that some oil and gas firms were now ripe for a takeover at battered valuations.

“There could be distressed oil assets to be snapped up by cash-rich (rivals) for way less than the equivalent development cost of new oilfields,” said Edmund Shing, portfolio manager at BCS Asset Management.